Empirical Evidence of Okun’s Law in the Philippine Economy: A Cointegration Analysis
Journal Title: Review of Socio-Economic Research and Development Studies - Year 2017, Vol 1, Issue 1
Abstract
This study investigates the influence of relevant macroeconomic variables on unemployment in the Philippines. Specifically, it aims to: find a coefficient that would characterize the relationship of the between unemployment and GDP using a standard cointegration approach; investigate relevant macroeconomic factors that may affect unemployment; and draw economic and policy implications that will guide policymakers in crafting public policies in improving employment generation. It used quarterly time series data from the first quarter of 1989 to fourth quarter of 2004. Cointegration test was used to determine the long-run relationship while an error correction was employed to determine the short-run behavior of the data. Results of the study reveals that in the long-run a 1% increase in GDP is associated with a reduction in unemployment by 0.7%. While in the short-run, GDP has a larger effect on cutting unemployment; an increase in GDP by 1% results to a decrease in unemployment by 0.95%. Thus there is evidence to indicate that Okun’s law is relevant in the Philippine economy. The sectoral analysis shows that the economy’s industrial and agriculture sectors are found to have a negative effect on the general unemployment level. However, the service sector on the other has a positive effect, implying that as its output grows, unemployment tends to rise as well. This is probably due to job and skills mismatch in the service sector which leads to structural unemployment. It is recommended that the industry sector be prioritized especially the manufacturing and construction subsectors, in the development planning process.
Authors and Affiliations
Karl John A. Galvez and Ernesto F. Bulayog
Keywords
Related Articles
- EP ID EP691444
- DOI -
- Views 175
- Downloads 0
Farmers’ Perception on the Impacts of Climate Change in Malinao Dam Community, Pilar, Bohol
Climate change is considered as one of the pressing environmental issues in the world today, which influences several sectors in the economy, including agriculture. This study analyzes the perception of farmers on the im...
Determinants of International Migration of the Philippine Labor Force: A Panel Data Analysis
The continuous outflow of the Philippine labor force contributes to brain drain or the loss of skilled workers. Concerning to this, past researches separately modelled international migration based from push and pull fac...
Determinants of Carbon Emission among Households in Eastern Visayas, Philippines
Information and studies about carbon emissions are available on national level but it is very limited on regional level. Hence, we focus on Eastern Visayas and aim to investigate the influence of rising income and other...
Evaluating the Effectiveness of Teaching Strategies: The Case of a National Vocational School in Hilongos, Leyte
Evaluation of teaching strategies serves as a guide for diagnosis and improvement for effective teaching. However, studies focusing on the effectiveness of teaching strategies in Region 8, Philippines is a bit limited. H...
Coping Mechanisms and Determinants of Perceived Status of Men and Women Farmer Beneficiaries of the Yolanda Rehabilitation and Reconstruction Program (YRRP) in Region VIII
The Yolanda Rehabilitation and Reconstruction Program (YRRP) is a comprehensive program spearheaded by the Department of Agriculture in Region VIII, Philippines aiming to restore the livelihood farmers and households aff...