Acta Oeconomica Pragensia 2018, 26(4):12-29 | DOI: 10.18267/j.aop.609

Unemployment and economic growth: Is there a relationship in the European Union?

Milen Velev
Prof. Dr. Asen Zlatarov University, Faculty of Social Sciences, Burgas, Bulgaria (milen.velev@gmail.com)

The aim of this paper is to investigate the relationship between unemployment and economic growth in the European Union and in individual European countries. This allows to determine what the effect on the unemployment rate will be when there is a change in output. The European Union (28 countries) quarterly data used is for the period from 2000Q1 to 2017Q3. Regression analysis, co-integration analysis and a vector error correction model have also been used. The relationship between the unemployment rate and economic growth in the EU-28 for the period examined in this study is less pronounced in comparison with the other countries. A negative relationship between economic growth and a change in the unemployment rate is obtained for all the countries in the European Union (28 countries). During each stage of the period studied, the effect of hysteresis on the labour market grew. The results from the statistical analysis show that the data on economic growth and the change in the rate of unemployment in the EU-28 are co-integrated. The validity of Okun's Law for the economy of the European Union is confirmed although during the period studied the European economy went through several phases of the economic cycle.

Keywords: unemployment rate, economic growth, Okun's Law, European Union
JEL classification: E24, E32, O40, O52

Published: December 1, 2018  Show citation

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Velev, M. (2018). Unemployment and economic growth: Is there a relationship in the European Union? Acta Oeconomica Pragensia, 26(4), 12-29. doi: 10.18267/j.aop.609
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