agricultural and non-agricultural employment reveals that Okun’s Law holds particularly well for nonagricultural jobs.<sup>2</sup> For agricultural jobs Okun’s Law is reversed, i.e. a negative shock to growth results in more jobs in agriculture and vice versa. This effect seems limited to times of economic downturn which suggests that agriculture serves as a shock-absorber for labor made redundant in the industrial sector.

The paper develops these results as follows. The following section discusses the data that were obtained for the analysis while section three presents the statistical methodology that was applied for analyzing the data. The fourth section focuses on deriving the aggregate results for the OLC in the eight countries under study and puts them into context by discussing how variation in labor market regimes can explain the difference in the strength of Okun’s Law across countries. The fifth section focuses entirely on times of economic crisis to discern whether the OLC differs across the business cycle. It also discusses the effect agricultural jobs play in economic downturns. The last section reviews the results and concludes.

# **Data**

Obtaining the relevant data for this study was difficult, which may explain the relative dearth of empirical research published on this issue, especially for developing countries. Two key variables have to be collected: real GDP and the employment rate. To fine-tune the analysis further, data were collected for agricultural employment, where available. Table 1 below lists the variables and the sources they were selected from for this study. The table shows that the data come from a number of sources and real GDP is anchored in different years. However, this does necessarily pose a challenge to the analysis as it is the relative magnitude that matters for the analysis.

All data in Table 1 were collected on a quarterly basis. This means that countries in East Asia that do not report quarterly employment and GDP data cannot be included in the analysis. Unfortunately, this includes all low and some middle income countries in the region. Some difficult decisions have to be made. For example, Indonesia reports semiannual employment data, however only from the late 2000s. Reducing the estimation to semiannual data for all countries from the mid-2000s would imply forfeiting too many data for a meaningful statistical analysis. China, on the other hand, does not report quarterly real GDP data – however, it does report quarterly real GDP growth data. From this, China’s quarterly GDP data were constructed allowing for China to be included in the analysis.

Overall, the sample includes the four most developed countries in East Asia (South Korea, Singapore, and the two Chinese autonomous territories Hong Kong SAR, China, and Taiwan, China) and four solidly middle income countries (China, Malaysia, the Philippines, Thailand). Data are available for all countries between the years 2000 and 2011 and for some countries (South Korea, the Philippines, and Taiwan, China) they reach back to 1996. All data were seasonally adjusted in order to remove transitory variation from the series that could obstruct the underlying relationship between economic and employment growth.

> 2 See World Bank (2010) for a similar finding for Indonesia.

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