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Labor Market Institutions and Long-Term Effects of Youth Unemployment

Author

Listed:
  • Kawaguchi, Daiji

    () (University of Tokyo)

  • Murao, Tetsushi

    () (Kyushu University)

Abstract

Graduating from a school during a time of adverse economic conditions has a persistent, harmful effect on workers' subsequent employment opportunities. An analysis of panel data from OECD countries during the 1960-2010 periods reveals that a worker who experiences a one-percentage-point higher unemployment rate while the worker is 16-24 years old has a 0.14 percentage-point higher unemployment rate at ages 25-29 and 0.03 percentage points higher at ages 30-34. The persistence of this negative effect is stronger in countries with stricter employment protection legislation. A composite index for labor market rigidity is constructed and the index is shown to have positive correlation with the persistence. Moderating macroeconomic fluctuations is more important in countries that have more persistent labor-market entry effects on subsequent outcomes.

Suggested Citation

  • Kawaguchi, Daiji & Murao, Tetsushi, 2014. "Labor Market Institutions and Long-Term Effects of Youth Unemployment," IZA Discussion Papers 8156, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp8156
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    Cited by:

    1. Bart Cockx, 2016. "Do youths graduating in a recession incur permanent losses?," IZA World of Labor, Institute for the Study of Labor (IZA), pages 281-281, August.
    2. Filip KOKOTOVIĆ, 2016. "An empirical study of factors influencing total unemployment rate in comparison to youth unemployment rate in selected EU member-states," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(3(608), A), pages 79-92, Autumn.
    3. Corinna Ghirelli, 2015. "Scars of early non-employment for low educated youth: evidence and policy lessons from Belgium," IZA Journal of European Labor Studies, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 4(1), pages 1-34, December.
    4. repec:kap:atlecj:v:45:y:2017:i:2:d:10.1007_s11293-017-9537-7 is not listed on IDEAS
    5. Cockx, Bart & Ghirelli, Corinna, 2016. "Scars of recessions in a rigid labor market," Labour Economics, Elsevier, vol. 41(C), pages 162-176.
    6. Corinna GHIRELLI, 2015. "Scars of early non-employment in a rigid labour market," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2015008, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    7. Urbánné Mező, Júlia & Udvari, Beáta, 2016. "Munkapiaci rugalmasság és ifjúsági foglalkoztathatóság
      [Labour-market flexibility and youth employment]
      ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(4), pages 431-460.
    8. Filip KOKOTOVIĆ, 2016. "An empirical study of factors influencing total unemployment rate in comparison to youth unemployment rate in selected EU member-states," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(3(608), A), pages 79-92, Autumn.

    More about this item

    Keywords

    unemployment; cohort analysis; port of entry; hysteresis; persistence;

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings
    • K31 - Law and Economics - - Other Substantive Areas of Law - - - Labor Law

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