The Short- and Long-Run Impacts of Financial Crises on Youth Unemployment in OECD Countries

Abstract

The impact of financial crises on the youth unemployment rate (YUR), compared to the total unemployment rate (UR), is estimated for a panel of OECD countries over the period 1981–2009, using bias-corrected dynamic panel data estimators of short- and long-run coefficients. Both YUR and UR are found highly persistent. Also, short- and long-run effects of financial crises on YUR are significantly large, respectively, some 1.9 and 1.5–1.7 times higher than the short- and long-run effects on UR. Similar results are found for the unemployment impacts of GDP growth lagged 1 year and institutional variables. These results are robust to various dynamic specifications.

Keywords: Bias-Corrected LSDV, Dynamic Panel Data, Financial Crises, Youth Unemployment

JEL Classification: J48, J68, G01, J60