The Inverted Okun's Law: Evidence from France

Authors

  • Jean-François Verne Université Saint-Joseph de Beyrouth, Faculté de Sciences Economiques

DOI:

https://doi.org/10.15353/rea.v17i3.6502

Keywords:

Okun’s Law, GDP Growth, Unemployment, Nonlinear Models, Threshold Regression

Abstract

This study considers the nonlinear relationship between GDP growth and unemployment in France (1975–2024) using a logistic smooth transition regression (LSTR) model. Findings reveal a threshold unemployment rate of 7.93%, above which the traditional Okun’s law holds (GDP growth reduces unemployment). Below this threshold, an inverted Okun’s law emerges, where economic growth coincides with rising unemployment. This is explained by technological advancements, skill mismatches, and delayed employment adjustments. The results indicate that macroeconomic policies based on linear assumptions are limited in their capacity to address unemployment challenges effectively. Recognizing these nonlinear dynamics is crucial for designing effective labor market policies that account for asymmetries in economic fluctuations.

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Published

2025-09-27

Issue

Vol. 17 No. 3 (2025)

Section

Articles

License

Copyright (c) 2025 Jean-François Verne

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