Is there Hysteresis in Youth Unemployment in Africa? Implications for the Output–Unemployment Relationship

The study examines the extent to which the hysteresis effect exists in the youth unemployment rate in selected African countries during the period 1991–2021, disaggregated based on territorial delineation, income levels, and gender while accounting for structural breaks as well as cross-sectional dependence. Implications for output–unemployment relationship are then analysed. While our findings from the univariate unit root tests generally provide evidence of the hysteresis hypothesis (running from 60 to 97%) for almost all countries, and sub-regions in sub-Saharan Africa, there is limited evidence when structural breaks are accounted for. Hysteresis is only visible in 19 countries (40%) when we consider total youth unemployment. In the latter case, taking consideration of gender, the effect in females is found only in 16 countries (34%) and in males only in 10 countries (21.3%). The lower-middle-income countries reject the natural rate hypothesis in total as well as both male and female youth unemployment. Whereas the youth unemployment in upper-middle-income countries experience hysteresis, only male youths exhibit non-stationarity in low-income countries. Accounting for cross-section dependence does not substantially alter the finding of the hysteresis effect in all except the males in southern Africa and upper-middle-income countries. Also, larger youth unemployment effect of output growth during periods of negative output gap is observed significant compared to periods of positive output gap. However, in economic recession, increases in output are found to orchestrate larger unit reductions for female relative to male youth unemployment. Similarly, during an expansion, increases in output were found to lower unit increase for the female compared to the male youth unemployment. We, therefore, argue for the gender-sensitive labour-related interventions to curtail youth unemployment, as well as consideration of income and location in the effective analysis of both hysteresis and the Okun’s lay theory for appropriate economic policies.