Youth Unemployment and Stigmatization Over the Business Cycle in Europe

This paper studies the dynamics of the scarring effect of youth unemployment over the business cycle in 12 European countries. On the one hand, we analyse differences associated with the negative effect of past unemployment experiences on future labour market status. And, on the other hand, we consider the potential stigmatization of prospective young workers – that is, the extent to which employers are more reluctant to hire individuals with a history of unemployment. Our results are based on data from the EU‐SILC for the period 2004 to 2015 and provide support in favour of a significant scarring effect of unemployment among youths that is highly heterogeneous across the countries under analysis and that increased substantially during the Great Recession. In contrast, the evidence of stigma effects was found to be rather weak.