Okun's law

Economic growth does not reduce unemployment equally across Indonesia: it helps a lot in some districts and barely at all in others. Because growth in one district also affects jobs in its neighbors, job policies work best when they fit local conditions and are coordinated across nearby regions.

This paper investigates the regional Okun’s law across 514 districts of Indonesia over the 2011–2020 period. To handle the endogeneity issue, we apply a two-stage least squares (2SLS) model and use regional temperature as instrument for economic …