Applicability Test Of The Okun's Law In China

Oken's law is a very important principle that describe the relation between economy and unemployment. From its' opening and reform, China has made great progress on economy. China's average economy increase rate is more than 9 percent each year. But at the same time, China's unemployment rate is very high. So it is important to research whether Oken's law is suitable in China.In the last, the research about Oken's law in China don't resolve one problem, that is the unemployment figure issued by government don't contain potential unemployment, and the research result based on this is unbelievable. In this paper, I adjust the unemployment figures and check the Oken's law in China.I research the Oken's law in China through three relations: Check the output gap versus unemployment bias, check the output gap versus unemployment varies and check the increase rate of economy versus unemployment variesIn this paper I used Granger and ADF methods to check whether Oken's law is suitable in China. The outcome represents that the relation between economy and unemployment is negative, and the relation is not a simply linear function.The main contents and construction are: Section 1 I introduce the Oken's law and the research outcomes in and abroad China. Section 2 I estimate the potential output and the potential unemployment in rural and urban areas. Section 3 I check the Oken's law in China. Section 4 I gave some proposals about decrease unemployment.Some innovation in this paper are: I check the Oken's law with new methods of Granger and AEG . I check Oken's law with adjusted unemployment figures.