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7 Rev. Eur. Stud. 240 (2015)
The Effect of GDP per Capita on Employment Growth in Germany, Austria and the Czech Republic: Macroeconomic Analysis

handle is hein.journals/rveurost7 and id is 2898 raw text is: Review of European Studies; Vol. 7, No. 11; 2015 ISSN 1918-7173 E-ISSN 1918-7181 Published by Canadian Center of Science and Education The Effect of GDP per Capita on Employment Growth in Germany, Austria and the Czech Republic: Macroeconomic Analysis Mansoor Maitah1, Daniel Toth2 & Elena Kuzmenko1 1 Department of Economics, Faculty of Economics and Management, Czech University of Life Sciences Prague, Czech Republic 2 Department of Economic Theories, Faculty of Economics and Management, Czech University of Life Sciences Prague, Czech Republic Correspondence: Mansoor Maitah, Faculty of Economics and Management, Czech University of Life Sciences Prague, Kamycka 129, Prague 616921, Czech Rep. E-mail: Maitah@pefczu.cz Received: April 23, 2015 Accepted: June 30, 2015 Online Published: July 30, 2015 doi: 10.5539/res.v7nl lp240 URL: http://dx.doi.org/10.5539/res.v7nllp240 Abstract Unemployment rate in the European Union (EU) is one of the biggest social and economic problems nowadays. Comparison among individual EU countries becomes quite difficult. This problem is specific for not just economically weaker countries like Greece, but applies also to the Czech Republic, where the employment rate has been manifesting stagnation in recent years. The Czech Republic has been below its employment development potential for a long time. The experience of Austria and Germany, the two neighboring countries, can serve as a good example of overcoming this situation. The Austria is culturally, geographically and demographically is closer to the Czech Republic. From a theoretical standpoint, the objectives of the present paper are focused on verification and extension of the Okun's law. The prominent American economist Arthur Okun asserted that GDP growth has an unemployment-reducing effect. He found that a two percent increase in GDP results in a 1 percent decline in unemployment. Analytical studies, in turn, show that a two percent increase in GDP per capita leads to a one percent growth in employment rate. The latters can be considered as the Okun's law extension. The empirical analysis of Germany and Austria examples, where the employment development is stimulated namely through special tools of GDP per capita growth, has a practical impact as well. Keywords: Unemployment, employment policy and social development, GDP, Austria, Czech Republic, Germany 1. Introduction Austrian employment-related issues were investigated by a number of authors in a number of works. One of the most noteworthy among them is the study of Tamesberger (2014), in which the author gave a multifactorial explanation of youth unemployment in Austria. The author asserts that one of the biggest problems in European society is the significantly high amount of unemployed youth. Thank to conventional political solutions and active employment policy that are currently practicing in Austria quite purposefully the latter proved to keep youth unemployment at a low level, even despite the financial and economic crisis. Thus we can consider the Austrian experience in this field as a prime example. It is empirically shown that active labor market policies in Austria are focused primarily on youth unemployment reducing. That is why the social group of Austrian young people is often referred to as a group in Safety net. For purposes of employment analysis Tamesberger (2014) suggests to use a larger number of economic indicators, arguing that namely active economic policy stimulates demand for labor in the economy. (Tamesberger, Leitgdb, & Bacher, 2014) Another very relevant study (Bell & Blanchflower, 2011) examines the youth employment in the light of an economic recession and its influence on the labor markets. The USA and the Great Britain served as a case study. Authors argued that young people, aged 16-24 years, have suffered disproportionately during the recession. The analysis of the structure of youth unemployment was done on the basis of micro-data, providing evidence that the effects of youth unemployment have an impact on the increased costs to individuals and society in the future. Thus, the study covers social aspects as well. Though the effects of current policies are uncertain, the results of these studies provide us with an important argument for intervention and active employment policy.

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