Economics: Oken’s Law

Okun’s law (named after Arthur Melvin Okun, who published this thesis in 1962) is an empirically observed relationship between unemployment and losses in a country’s production.

The gap version states that for every 1% increase in the unemployment rate, a country’s GDP will be approximately 2% marginally lower than its potential GDP.

The difference version describes the relationship between quarterly changes in unemployment and quarterly changes in real GDP.

Like much of economic theory, Okun’s law has been challenged by many economists.