Unemployment rate sensitivity to GDP fluctuations across Polish voivodeships

This article takes up the issue of sensitivity of unemployment with respect to changes in the aggregate production in Poland, in the years 1995-2011. It continues a long tradition of empirical literature on Okun’s Law. The issue of consequences of economic growth changes for the labour market gained importance recently, especially with the recent economic crisis and significant slowdown in economic growth in Poland. In the study we used data on unemployment rates and economic growth for sixteen Polish voivodeships to estimate the parameters of the Okun equation in two versions (in the „difference” version and „gap” version). We used econometric methods suitable for panel data. The estimated Okun’s parameter, amounting to an average of about 0.4, places Poland in the middle of the ranking of the OECD countries in terms of sensitivity of changes in unemployment relative to GDP. The hypothesis of a significantly stronger response of unemployment to changes in GDP in the period after 2008 (crisis in the global economy) was tested as well. The paper presents the Okun’s parameter estimates for each voivodeship in Poland and formulates hypothesis regarding the causes of their variability being related to economic structures and labour supply features of Polish voivodeships.