Abstract

LORIA DIAZ DE GUZMAN, Eduardo Gilberto; RAMIREZ GUERRA, Emmanuel Alejandro  and  SALAS, Emmanuel. The Okun's Law and the labor flexibility in Mexico: A cointegration analysis, 1997Q3-2014Q1. Contad. Adm [online]. 2015, vol.60, n.3, pp.631-650. ISSN 0186-1042.  https://doi.org/10.1016/j.cya.2015.05.012.

Because the labor flexibility has become an increasing condition in labor markets, we estimated the effect of labor flexibility on the unemployment rate in Mexico for 1997Q3-2014Q1. For this fact, we estimated a VECM(4) inspired on the Okun's Law which includes a labor flexibility index, measured by the ratio of the temporary contracts to the total employees in the formal labor market. As expected by the Okun's Law (1962), we found a negative relationship between GDP and the unemployment rate. However, the most interesting result is that the labor flexibility index exhibits an increasing effect on the unemployment rate with an elasticity of 1.28.

Keywords : Labor flexibility; Okun's law; Cointegration; Vector error correction; Cholesky ordering; Weak exogeneity.