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Youth Unemployment in Advanced Europe: Okun’s Law and Beyond

Author

Listed:
  • Angana Banerji
  • Ms. Huidan Huidan Lin
  • Mr. Sergejs Saksonovs

Abstract

The crisis has intensified what was previously a chronic unemployment problem in Europe; youth unemployment is now at unprecedented highs in some European countries. This paper assesses the main drivers of youth unemployment in Europe. It finds that much of the increase in youth unemployment rates during the crisis can be explained by output dynamics and the greater sensitivity of youth unemployment to economic activity than adult unemployment. Labor market institutions also play a significant role in explaining the persistently high levels of youth unemployment, especially the tax wedge, minimum wages relative to the median wage, spending on active labor market policies, the opportunity cost of working (measured by the unemployment benefits), vocational training, and labor market duality. This suggests that policies to address youth unemployment should be comprehensive and country-specific, focused on reviving growth and advancing labor market reforms.

Suggested Citation

  • Angana Banerji & Ms. Huidan Huidan Lin & Mr. Sergejs Saksonovs, 2015. "Youth Unemployment in Advanced Europe: Okun’s Law and Beyond," IMF Working Papers 2015/005, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2015/005
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    Citations

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    Cited by:

    1. Marioara Iordan & Mihaela Nona Chilian, 2015. "Employment and Unemployment in the EU. Structural Dynamics and Trends," Working Papers of Institute for Economic Forecasting 151030, Institute for Economic Forecasting.
    2. Rob Gandy & Chris Mulhearn, 2021. "Allowing for unemployment in productivity measurement," SN Business & Economics, Springer, vol. 1(1), pages 1-38, January.
    3. Kouamé, Wilfried A.K. & Tapsoba, Sampawende J.-A., 2019. "Structural reforms and firms’ productivity: Evidence from developing countries," World Development, Elsevier, vol. 113(C), pages 157-171.
    4. Tingyun Chen & Jean-Jacques Hallaert & Alexander Pitt & Haonan Qu & Maximilien Queyranne & Alaina Rhee & Anna Shabunina & Jérôme Vandenbussche & Irene Yackovlev, 2018. "Inequality and Poverty across Generations in the European Union," IMF Staff Discussion Notes 18/01, International Monetary Fund.
    5. Hélène Couprie & Xavier Joutard, 2017. "Atypical Employment and Prospects of the Youth on the Labor Market in a Crisis Context," THEMA Working Papers 2017-08, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
    6. Mindaugas Butkus & Janina Seputiene, 2019. "The Output Gap and Youth Unemployment: An Analysis Based on Okun’s Law," Economies, MDPI, vol. 7(4), pages 1-17, November.
    7. Ousama Ben-Salha & Zouhair Mrabet, 2019. "Is Economic Growth Really Jobless? Empirical Evidence from North Africa," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 61(4), pages 598-624, December.
    8. Floro Ernesto Caroleo & Elvira Ciociano & Sergio Destefanis, 2017. "Youth Labour-Market Performance, Institutions and Vet Systems: A Cross-Country Analysis," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 3(1), pages 39-69, March.
    9. Giovanni S. F. Bruno & Misbah Choudhry Tanveer & Enrico Marelli & Marcello Signorelli, 2017. "The short- and long-run impacts of financial crises on youth unemployment in OECD countries," Applied Economics, Taylor & Francis Journals, vol. 49(34), pages 3372-3394, July.

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