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The Impact of Financial Crises on Youth Unemployment Rate

Author

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  • Misbah Tanveer Choudhry
  • Enrico Marelli
  • Marcello Signorelli

Abstract

The impact of last financial crisis (2007-08) and subsequent global recession (2008-09) has been deeper on the weakest segments of the labour market. In this paper, we mainly focus on the extent and persistence of the impact of (past and last) financial crises on youth (15-24) unemployment rate. After a review of the existing (theoretical and empirical) literature on the determinants of youth unemployment rate in general and at the occurrence of economic crises, we present empirical estimations on the impact of past financial crises on young workers. We empirically investigate the relationship between financial crises and youth unemployment rate by employing fixed effects panel estimation on a large panel of countries (about 70) around the world for the period 1980-2005. Gender specific effect of crises on young workers is also investigated. To analyse the severity of financial crises for economies at different levels of economic development, we re-estimate our model for sub-samples of high income OECD countries and other economies in the sample. For further robustness check and sensitivity analysis, alternative definitions of crises are considered. The "persistence" of the impact of financial crises for young workers is also investigated. Finally we also estimate the Arellano-Bond dynamic panel, confirming the significance of the results. Young people are far more affected by the employment crises than the elder; long term unemployment for young workers can be harmful and may result in “discouraged workers” effects and social exclusion from labour market. Notwithstanding some peculiarities of the last crisis, our econometric investigations can be useful to better assess its impact on youth unemployment. At the end of the paper, before presenting some final considerations and policy implications, very recent data on youth labour market dynamics are analysed and discussed.

Suggested Citation

  • Misbah Tanveer Choudhry & Enrico Marelli & Marcello Signorelli, 2010. "The Impact of Financial Crises on Youth Unemployment Rate," Quaderni del Dipartimento di Economia, Finanza e Statistica 79/2010, Università di Perugia, Dipartimento Economia.
  • Handle: RePEc:pia:wpaper:79/2010
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    References listed on IDEAS

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    1. Niall O'Higgins, 2005. "Trends in the Youth Labour Market in Developing and Transition Countries," Labor and Demography 0507002, University Library of Munich, Germany.
    2. Luca Nunziata & Stefano Staffolani, 2007. "Short‐Term Contracts Regulations And Dynamic Labour Demand: Theory And Evidence," Scottish Journal of Political Economy, Scottish Economic Society, vol. 54(1), pages 72-104, February.
    3. Niall O'Higgins, 1997. "The challenge of youth unemployment," International Social Security Review, John Wiley & Sons, vol. 50(4), pages 63-93, October.
    4. Mr. Luc Laeven & Mr. Fabian Valencia, 2008. "Systemic Banking Crises: A New Database," IMF Working Papers 2008/224, International Monetary Fund.
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    Cited by:

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    2. Shoaib Imtiaz & Arshad Ali & Zeeshan Khan & Mohib Ullah & Muhammad Khan & Julija Jacquemod, 2020. "Determinants of Youth Unemployment in Pakistan," International Journal of Economics and Financial Issues, Econjournals, vol. 10(5), pages 171-177.
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    5. Olga Demidova & Marcello Signorelli, 2010. "The Impact of Crises on Youth Unemployment of Russian Regions: An Empirical Analysis," Quaderni del Dipartimento di Economia, Finanza e Statistica 78/2010, Università di Perugia, Dipartimento Economia.
    6. Fernando A. de Oliveira Tavares & Elisabeth T. Pereira & António Carrizo Moreira, 2014. "The Portuguese Residential Real Estate Market. An Evaluation of the Last Decade Abstract: This article presents an integrated vision of the context of the residential real estate market in Portugal. I," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 61(6), pages 739-757, December.
    7. Damiani, Mirella & Pompei, Fabrizio & Ricci, Andrea, 2011. "Temporary job protection and productivity growth in EU economies," MPRA Paper 29698, University Library of Munich, Germany.
    8. Stefano Gurciullo, 2014. "Stess-testing the system: Financial shock contagion in the realm of uncertainty," Papers 1412.1679, arXiv.org.
    9. Davide Castellani & Fabio Pieri, 2011. "Foreign Investments and Productivity Evidence from European Regions," Quaderni del Dipartimento di Economia, Finanza e Statistica 83/2011, Università di Perugia, Dipartimento Economia.
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    11. Katharina Rathmann & Timo-Kolja Pförtner & Klaus Hurrelmann & Ana M. Osorio & Lucia Bosakova & Frank J. Elgar & Matthias Richter, 2016. "The great recession, youth unemployment and inequalities in psychological health complaints in adolescents: a multilevel study in 31 countries," International Journal of Public Health, Springer;Swiss School of Public Health (SSPH+), vol. 61(7), pages 809-819, September.
    12. Francesco Venturini, 2011. "Product variety, product quality, and evidence of Schumpeterian endogenous growth: a note," Quaderni del Dipartimento di Economia, Finanza e Statistica 93/2011, Università di Perugia, Dipartimento Economia.

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    More about this item

    Keywords

    crises; labour impact of economic crises; youth unemployment; panel fixed effects.;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J29 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Other
    • J69 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Other

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