Background:           Okun’s law tests the negative relationship between the unemployment rate and the output rate of a country’s economy. This thesis looks at the validity of Okun’s law in ten highly developed countries.

Purpose:                  We want to look at the validity of Okun’s law in the top 10 Human Development Index countries, as listed in the 2016 Human Development Report. The thesis looks at their annual unemployment rates and real GDP over the years 1983-2016. We want to see to what extent Okun’s law applies in these countries.

Method:                   Engle-Granger cointegration is performed, after which Fully Modified OLS provides the Okun’s coefficient which will be interpreted and from which conclusions will be drawn. Fully Modified OLS is used because it provides unbiased and consistent estimates for cointegrated time series.

Conclusion:             The results show that Okun’s law holds in five of the ten countries. The Okun’s coefficient varies between -0.58% and -1.43% in those cases.

Originality:             Our contribution is that we investigate Okun’s law using the top 10 HDI countries from the 2016 Human Development Report. Testing this data provides a more recent dataset when compared to similar previous research.