Validity of Okun’s law in Chile and Chilean’s regions: 2013-2023

Abstract

Numerous studies and analyses of the economy of Chile show a stagnation of economic growth in the last decade, in a scenario where there is a double shock, one internal derived from the so-called social outbreak in the last quarter of 2019 and another derived from the Covid-19 global health crisis. From this perspective, some prestigious economists have stated that the country faces “an undeclared labor emergency.” Accordingly, this study will review compliance with the so-called Okun Law from 2013 to 2023. The gap model proposed by Arthur Okun will be used, using linear regression models on the 16 regions of Chile. Okun’s Law is fulfilled, either in terms of the quarterly or annualized series, in the regions of Chile between the years 2013-2023. However, the differences between the Okun Law Coefficients reiterate the structural heterogeneity of the regions of Chile and, in addition, warn us of the need to formulate differentiated public policies to face coefficients of various magnitudes, whether low, high, or intermediate.