Youth Unemployment: Key Determinants and the Impact of Crises

Abstract

This chapter discusses the impact of various factors on the youth unemployment rate (YUR) with respect to the total unemployment rate. In particular, we use different fixed effect panel models to estimate the role played by macroeconomic and structural conditions (e.g. GDP growth rate, inflation, real interest rate, demographic variables, education), financial crises, institutions and policies (e.g. labour market reforms, ALMPs, overall economic freedom). The econometric analysis is based on a panel of OECD countries for the period 1981–2009. Our empirical analysis confirms the expected role of macroeconomic and structural conditions; it shows the additional effect of financial crises; and it underlines the key importance of various institutions and policies. Most importantly, our results prove the differing magnitudes of the impacts of the above-mentioned factors on youth unemployment with respect to the total unemployment rate. These results have major policy implications also in consideration of the still rising level of youth unemployment, especially in Europe.

Keywords: Youth unemployment, Financial crises, Macroeconomic conditions, Institutions and policies