Multilevel Okun’s Law: Heterogeneity, Stability and Asymmetry in Ecuador

Okun’s Law has been predominantly estimated at the aggregate level and for advanced economies, leaving its heterogeneity insufficiently explored in developing countries. This paper examines such heterogeneity for Ecuador, articulating for the first time in a developing and dollarised economy the multilevel estimation of the coefficient, the assessment of its temporal stability and the test for cyclical asymmetry within a single analytical framework. The relationship between economic activity and unemployment is estimated at the national level and for 19 disaggregations by area, sex, age, ethnicity and educational attainment, using monthly series from 2021 to 2025. The results suggest that the aggregate coefficient conceals a profound heterogeneity: Okun’s Law operates with intensity in the urban, female, youth, Afro-Ecuadorian and university-educated segments, yet is non-existent in the rural, male, older-age, indigenous and lower-education strata. This configuration is temporally robust and predominantly symmetrical between phases of the cycle, with specific exceptions in the Montubio and postgraduate segments. Economic growth reduces unemployment only in certain groups, whilst in the remainder the cyclical adjustment is channelled through margins that conventional statistics do not capture, suggesting that economic growth may be a necessary but not sufficient condition for improving labour market outcomes as a whole.