Commuting effects in Okun's Law among British areas: Evidence from spatial panel econometrics. (13th March 2015)

• Record Type: Journal Article
• Authors: Palombi, Silvia; Perman, Roger; Tavéra, Christophe
• Is Part Of: Papers in regional science. Volume 96:Number 1(2017)
• Page Start: 191
• Page End: 209
• Publication Date: 2015-03-13
• Subjects: R11 -- C31 -- J64; Unemployment -- output growth -- commuting -- spatial econometrics -- panel data; Regional planning -- Periodicals; City planning -- Periodicals; Urbanization -- Periodicals; Economic geography -- Periodicals; 307.12
• DOI: 10.1111/pirs.12166
• Languages: English
• ISSNs: 1056-8190

Abstract

Abstract: This paper examines Okun's Law using a spatial panel approach on NUTS 3 data for Great Britain over the period 1985–2011. The basic specification used as a starting point for the spatial analysis is the relationship between real output growth and unemployment rate changes. This is extended to incorporate spatial lags, to test for the presence of commuting effects, and to accommodate spatial residuals dependence. We estimate various spatial panel models, controlling for heterogeneity across areas, and find consistent evidence of a significant Okun's coefficient. Results also show that spillover effects from labour mobility and interregional linkages matter and have important implications for the validity of the empirical law.