Analysis of Youth Underemployment in Macedonia, Montenegro, and Serbia

41 Pages Posted: 4 Mar 2019

See all articles by Blagica Petreski

Blagica Petreski

Finance Think - Economic Research & Policy Institute

Jorge Dávalos

Universidad del Pacifico

Ivan Vchkov

Finance Think - Economic Research & Policy Institute

Despina Tumanoska

Finance Think - Economic Research & Policy Institute

Tereza Kochovska

Finance Think - Economic Research & Policy Institute

Date Written: February 28, 2019

Abstract

The vulnerability of working youth in Western Balkan countries is a major policy concern because their unemployment rates lie far above the EU average. We investigated the effect of youth underemployment on wages in three countries in the Western Balkans: Macedonia, Serbia, and Montenegro. Our empirical analysis built on a recent ILO school-to-work transition survey and controlled for sample-selection bias and endogeneity between underemployment and real hourly wages. The identification of the causal effect relied on traditional and novel instruments. In the former, the main instrument was a regional-unemployment indicator; in the latter, we exploited the conditional heteroskedasticity of underemployment to generate valid instruments. Our findings verified the negative relationship between underemployment and wages, which is strongest in Macedonia, followed by Montenegro and Serbia. These findings support the need for more aggressive youth-employment policies, including internship and traineeship programs, qualification, re-training, and adequate assessment of skills and competence.

Keywords: youth, underemployment, wages, Western Balkan countries

JEL Classification: J64, J30

Suggested Citation

Petreski, Blagica and Dávalos, Jorge and Vchkov, Ivan and Tumanoska, Despina and Kochovska, Tereza, Analysis of Youth Underemployment in Macedonia, Montenegro, and Serbia (February 28, 2019). Partnership for Economic Policy Working Paper No. 2019-04. Available at SSRN: https://ssrn.com/abstract=3344591 or http://dx.doi.org/10.2139/ssrn.3344591

Blagica Petreski (Contact Author)

Finance Think - Economic Research & Policy Institute ( email )

Skopje
Macedonia

Jorge Dávalos

Universidad del Pacifico ( email )

Av. Salaverry 2020
Región Metropolitana
Lima 18, Santiago Lima 11
Peru

Ivan Vchkov

Finance Think - Economic Research & Policy Institute ( email )

Skopje
Macedonia

Despina Tumanoska

Finance Think - Economic Research & Policy Institute ( email )

Skopje
Macedonia

Tereza Kochovska

Finance Think - Economic Research & Policy Institute ( email )

Skopje
Macedonia

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