Kristina Matuzeviciute-Balciuniene (p), Mindaugas Butkus, Laura Dargenytė-Kacilevičienė, Dovilė Ruplienė, Janina Šeputienė

Darja Reuschke

The seminal Okun's (1962) paper inspired an enormously rich strand of research on the unemployment-output growth nexus. Voluminous literature provides strong support for the validity of Okun's law. This relationship has attracted the attention of economists and macroeconomic policymakers, but with no consensus on the size of Okun's coefficient, which substantially varies across countries and over time. An increasing number of studies confirm Okun's law asymmetry and non-linearity. Previous research reveal that Okun's coefficient may vary across different phases of the business cycle. Oh (2017) and Donayre (2022) started a new strand of research that allows Okun's coefficient to vary across more than two phases of the business cycle. Authors state that division into three phases or regimes can reveal some hidden institutional change behind Okun's coefficient measured for entire cycles (Oh, 2017) and capture all of the variation in the joint behavior of output and unemployment (Donayre, 2022).
We want to combine and extend Oh (2017) and Donayre (2022) approaches and we put forward a hypothesis that Okun's coefficient varies over both the expansion and recession phases.
Our estimation strategy to examine the heterogeneity of the unemployment-output relationship over different stages of the business cycle is based on the gap version of Okun's law. It states that the difference between the actual and equilibrium unemployment rates is negatively related to a gap between actual real and potential outputs. To model the multinomial Okun coefficient we apply quantile regression, which estimates Okun coefficient with other parameters at the different levels of unemployment.
Our findings suggest that Okun's coefficient is significantly higher when the economic boom phase starts, and the unemployment rate is still high. It means that the expansion policy has a higher unemployment-reducing effect than the one suggested by the traditional binomial non-linear approach to Okun's law, even if the economy is already in the growth phase. We also find that Okun's coefficient is significantly lower when the recession phase starts, and the unemployment rate is still low. It suggests that the expansion policy has a lower unemployment-reducing effect than the one suggested by the traditional binomial non-linear approach to Okun's law at the beginning of the economic decline phase. We also estimated gender-, age-, and educational attainment-specific Okun's coefficients over the business cycle as these characteristics also cause heterogeneity of the growth–unemployment nexus.

Robin Konietzny, Bart Los (p)

Kristina Matuzeviciute-Balciuniene

This report assesses whether and how import exposure affected German workers’ regional mobility and job switching between 2000 and 2011. We also explore the wage and job satisfaction consequences of moving to another region and job switching following a trade shock. To this end, we develop a novel measure of regional-level trade exposure that also groups occupations with similar characteristics into business functions (management, marketing, R&D, and fabrication). We use trade data from the World Input-Output Database and regional employment data for 96 local labour markets from the German Federal Employment Agency, and combine them with worker-level data from the German Socioeconomic Panel to analyse trade exposure at the region-function level. Our findings show that more intense regional trade shocks made workers more likely to move to another region and switch their functions. In the most exposed regions, the probability that fabrication workers moved to another region more than doubled compared to the baseline probability. The probability of switching functions as a result of increased trade exposure increased by about 50% compared to the baseline. However, workers' probability of switching their functions following a trade shock increased only after a lag, likely because individuals need time to acquire new function-specific knowledge and skills. Moreover, the report reveals that workers who chose to move to another German region following a trade shock could offset the negative impact on their earnings and job satisfaction. In fact, moving resulted in higher wages and greater job satisfaction compared to staying behind. Workers who switched to a new function also increased their earnings but did not improve their job satisfaction compared to those who remained in the same function. These findings provide policymakers with new insights into the complex ways in which trade affects workers' lives and livelihoods, and how individuals adapt to the changing employment conditions it brings.
Keywords: Import shocks, business functions, worker-level adjustment, worker mobility, labour income, job satisfaction

Raquel Ortega-Argilés (p), Pei-Yu Yuan

Bart Los

During the last decades, research and innovation (R&I) public funding schemes have been crucial for driving economic prosperity and development and this has been acknowledged in the latest iteration of the UK national industrial strategy with the Levelling Up White Paper. Among other objectives, such as premium research excellence, R&I funding encourages the establishment of research partnerships to increase the value for money by benefiting from the synergies and potential multiplicative effects of supporting R&I in a multidisciplinary context. Apart from allowing complementarities between public and private sectors, they can also be instrumental for a more balanced spatial distribution of public research funding.

To illustrate the potential of using public funding as a promotor of levelling-up in the UK, this paper analysed the UK Research and Innovation funded projects repository between 2004 and May 2021. This information is complemented with data from ONS and scrapping individual information from Company House. Our dataset contains 25,122 projects and 44,406 participants. We use all collaborative (R&D), feasibility, smart and innovation voucher grants, and Knowledge Transfer Partnerships in 42 UK NUTS2 regions. The distribution of partnerships, the categorisation and measurement of the strength of R&I relationships are done by social network analysis. We use multilevel mediation panel data models to consider the important mediating effect of Business R&D on Levelling up and regional economic growth.

Our preliminary analysis shows that interregional and intraregional R&I UKRI collaboration contributes to explaining economic prosperity in the UK and its growth; however, there seems to not be a direct relationship with levelling-up or regional economic convergence.