The Empirical Analysis Of The Relationship Between The Output Growth Rate And Unemployment Rate In Chinese Economies

Okun's law is one of the basic rules of thumb of macroeconomics,it states that there exist a negative relationship between the economic growth rate and unemployment rate.Since Okun's original publication,the existence of a trade-off between unemployment and output in various market economies has been studied extensively and largely confirmed.The goal of this paper is to test for the presence of an Okun-type relationship in China,who is on the early stage of market economies.One should intuitively expect an Okun-type relationship to be weak or non-existent during the early stage of the market transition.However,as market reforms progress,a measurable link between growth and unemployment should emerge there as well.At present the research on the relationship of economic growth and unemployment rate in China almost conclude that Okun's law does not exist.But we think this conclusion does not consistent with economic law, because they took urban registered unemployment rate for real one and the former underestimated the latter.So we create a new method to compute the real unemployment rate,and perform empirical analyses of economic growth and unemployment rate in China by difference model and "mixed model".As a result,an Okun-type relationship significantly exists in China.There is autocorrelation when we estimate the Okun coefficient,Taking into consideration,the problem is resolved by means of adding a variable into the model.The paper consists of five sections.The first section is devoted to a re-statement of Okun's Law and its application to various economies.The following section describes the research design and does some preliminary analysis on the output growth and unemployment data.The third section tests the existence of Okun's Law and presents empirical findings and their implications.The fourth contains a discussion of the robustness of Okun's Law,and makes a comparison of the Okun coefficient in China economies to the coefficients in other countries.