URATE = 6 – 0.2 (aftOR – 100) = 6 − 0.2 (ADSGAP) In this URATE equation, the constant 6 here is the long-run equilibrium value or what is called the natural rate of unemployment (discussed in Chapter 2), corresponding to aftOR of 100. The λ coefficient linking aftOR to the unemployment rate in Table 1.F is 1/5, i.e. a 5 percentage point rise in aftOR reduces the unemployment by 1 percentage point.33 This is called the Lokun coefficient.
