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Unpacking youth unemployment in Latin America

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  • Cunningham, Wendy

Abstract

High youth unemployment rates may be a signal of difficult labor market entry for youth or may reflect high churning. The European and United States literature finds the latter conclusion while the Latin American literature suggests the former. This paper uses panel data to examine whether Latin American youth follow OECD patterns or are, indeed, unique. By decomposing transition matrices into propensity to move and rate of separation matrices and estimating duration matrices, the authors find that Latin American youth do follow the OECD trends: their high unemployment reflects high churning while their duration of unemployment is similar to that of non-youth. The paper also finds that young adults (age 19-24) have higher churning rates than youth; most churning occurs between informal wage employment, unemployment, and out-of-the labor force, even for non-poor youth; and unemployment probabilities are similar for men and women when the analysis control for greater churning by young men. The findings suggest that the"first employment"programs that have become popular in the region are not addressing the key constraints to labor market entry for young people and that more attention should be given to job matching, information, and signaling to improve the efficiency of the churning period.

Suggested Citation

  • Cunningham, Wendy, 2009. "Unpacking youth unemployment in Latin America," Policy Research Working Paper Series 5022, The World Bank.
  • Handle: RePEc:wbk:wbrwps:5022
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    References listed on IDEAS

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    1. Quintini, Glenda & Martin, John P. & Martin, Sébastien, 2007. "The Changing Nature of the School-to-Work Transition Process in OECD Countries," IZA Discussion Papers 2582, Institute for the Study of Labor (IZA).
    2. World Demographic and Ageing Forum & Glenda Quintini & John P. Martin & Sébastien Martin, 2007. "The changing nature of the school-to-work transition process in OECD countries," Journal Article y:2007:i:1, World Demographic and Ageing Forum.
    3. Bosch, Mariano & Maloney, William F., 2010. "Comparative analysis of labor market dynamics using Markov processes: An application to informality," Labour Economics, Elsevier, vol. 17(4), pages 621-631, August.
    4. Richard B. Freeman & David A. Wise, 1982. "The Youth Labor Market Problem: Its Nature Causes and Consequences," NBER Chapters,in: The Youth Labor Market Problem: Its Nature, Causes, and Consequences, pages 1-16 National Bureau of Economic Research, Inc.
    5. Wendy Cunningham & Linda McGinnis & Rodrigo García Verdú & Cornelia Tesliuc & Dorte Verner, 2008. "Youth at Risk in Latin America and the Caribbean : Understanding the Causes, Realizing the Potential," World Bank Publications, The World Bank, number 6483, April.
    6. Hemmer, Hans-R. & Mannel, C., 1989. "On the economic analysis of the urban informal sector," World Development, Elsevier, vol. 17(10), pages 1543-1552, October.
    7. Katharine G. Abraham & Robert Shimer, 2001. "Changes in Unemployment Duration and Labor Force Attachment," NBER Working Papers 8513, National Bureau of Economic Research, Inc.
    8. Freeman, Richard B., 1999. "The economics of crime," Handbook of Labor Economics,in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 52, pages 3529-3571 Elsevier.
    9. Maloney, William F, 1999. "Does Informality Imply Segmentation in Urban Labor Markets? Evidence from Sectoral Transitions in Mexico," World Bank Economic Review, World Bank Group, vol. 13(2), pages 275-302, May.
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    Cited by:

    1. Marina Bassi & Matías Busso & Sergio Urzúa & Jaime Vargas, 2012. "Disconnected: Skills, Education, and Employment in Latin America," IDB Publications (Books), Inter-American Development Bank, number 79504, February.
    2. repec:idb:idbbks:427 is not listed on IDEAS
    3. Cunningham, Wendy & Salvagno, Javier Bustos, 2011. "Youth employment transitions in Latin America," Policy Research Working Paper Series 5521, The World Bank.

    More about this item

    Keywords

    Youth and Governance; Labor Markets; Population Policies; Adolescent Health; Labor Policies;

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