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Cohort Crowding and Youth Labor Markets: A Cross-National Analysis

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  • Sanders Korenman
  • David Neumark

Abstract

We assess the evidence on the contribution of changes in the population age structure to the changing fortunes of youths in labor markets in advanced economies over the 1970s, 1980s and early 1990s, and use this evidence to project the likely effects of future cohort sizes on youth labor markets. We estimate a series of regression models to isolate the effects of exogenous changes in potential youth labor supply on youth employment and unemployment rates using a panel data set on 15 countries over more than 20 years. Our preferred estimates show large youth cohorts lead to increases in the unemployment rate of youths, with elasticities as high as .5 or .6. But the estimates generally indicate little effect of relative cohort size on employment rates of youths. We also find some evidence, though statistically weak, that labor market institutions that decrease flexibility lead to sharper responses of youth unemployment and employment rates to fluctuations in youth cohort size. Finally, due to recent declines in fertility, some European countries will see reductions in the size of youth cohorts over the next 16 years (especially Ireland, Italy, Portugal, and Spain). Projections suggest declining youth shares should improve youth labor markets in these countries, although the effects are not large compared with longer-term changes in youth unemployment rates. Other countries cannot expect demographic changes to improve youth labor markets since youth population shares are projected to decline moderately or to increase.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6031.

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Date of creation: May 1997
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Publication status: published as Cohort Crowding and Youth Labor Markets (A Cross-National Analysis) , Sanders Korenman, David Neumark. in Youth Employment and Joblessness in Advanced Countries , Blanchflower and Freeman. 2000
Handle: RePEc:nbr:nberwo:6031

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  1. Stapleton, David C & Young, Douglas J, 1988. "Educational Attainment and Cohort Size," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 6(3), pages 330-61, July.
  2. Levine, Phillip B & Mitchell, Olivia S, 1988. "The Baby Boom's Legacy: Relative Wages in the Twenty-First Century," American Economic Review, American Economic Association, American Economic Association, vol. 78(2), pages 66-69, May.
  3. Ray C. Fair & Kathryn M. Dominguez, 1987. "Effects of the Changing U.S. Age Distribution on Macroeconomic Equations," NBER Working Papers 2280, National Bureau of Economic Research, Inc.
  4. Layard, Richard & Nickell, Stephen & Jackman, Richard, 1991. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780198284345, October.
  5. Rebecca M. Blank & Richard B. Freeman, 1994. "Evaluating the Connection between Social Protection and Economic Flexibility," NBER Chapters, National Bureau of Economic Research, Inc, in: Social Protection versus Economic Flexibility: Is There a Trade-Off?, pages 21-42 National Bureau of Economic Research, Inc.
  6. Schmidt, Christoph M, 1992. "Ageing and Unemployment," CEPR Discussion Papers, C.E.P.R. Discussion Papers 693, C.E.P.R. Discussion Papers.
  7. Steven J. Davis & John C. Haltiwanger & Scott Schuh, 1998. "Job Creation and Destruction," MIT Press Books, The MIT Press, The MIT Press, edition 1, volume 1, number 0262540932, December.
  8. Anders Forslund & Alan Krueger, 1994. "An Evaluation of the Swedish Active Labor Market Policy: New and Received Wisdom," Working Papers, Princeton University, Department of Economics, Industrial Relations Section. 711, Princeton University, Department of Economics, Industrial Relations Section..
  9. David Card & Francis Kramarz & Thomas Lemieux, 1995. "Changes in the Relative Structure of Wages and Employment: A Comparison of the United States, Canada, and France," Working Papers, Princeton University, Department of Economics, Industrial Relations Section. 734, Princeton University, Department of Economics, Industrial Relations Section..
  10. Suits, Daniel B, 1984. "Dummy Variables: Mechanics v. Interpretation," The Review of Economics and Statistics, MIT Press, vol. 66(1), pages 177-80, February.
  11. Kim B. Clark & Lawrence H. Summers, 1982. "The Dynamics of Youth Unemployment," NBER Chapters, National Bureau of Economic Research, Inc, in: The Youth Labor Market Problem: Its Nature, Causes, and Consequences, pages 199-234 National Bureau of Economic Research, Inc.
  12. repec:fth:prinin:332 is not listed on IDEAS
  13. Wright, Robert E, 1991. "Cohort Size and Earnings in Great Britain," Journal of Population Economics, Springer, Springer, vol. 4(4), pages 295-305, November.
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