International Economics and Economic Policy

, Volume 13, Issue 1, pp 5–25 | Cite as

Youth unemployment in Europe – business cycle and institutional effects

Original Paper
First Online:

Abstract

In the aftermath of the Great Recession 2008/2009 European youth unemployment rose sharply from below 4.2 m in 2007 to more than 5.6 m young people under 25 unemployed in the EU28 countries in 2013. The youth unemployment rate expanded from 15.5 in 2007 to 25.5 in 2013. Beyond the consequences for individuals youth unemployment as a mass phenomenon is potentially menacing the stability of democratic societies. Hence there are good reasons to fight youth unemployment by any means. The paper analyses the specific structure and causes of youth unemployment. Although youth unemployment is also influenced by individual factors like insufficient qualification, we show that country-specific factors - institutions, traditions and characteristic structures - are of high importance in explaining the huge disparities between European countries. Using panel data estimates with specific country and time fixed effects we show that especially the Mediterranean countries responded to the economic downturn in a specific way. However, the high correlation of changes in the youth and adult unemployment rates across countries points to the fact that not only structural factors but also business cycle effects are important for explaining the sharp increase in the youth unemployment rate in Europe. The rise in joblessness is in fact closely related to macroeconomic slackness. Therefore, we argue that a two-handed approach combining institutional improvements with growth stimulating measures is needed to overcome the problem.

Keywords

Gross Domestic Product Unemployment Rate Business Cycle Young Worker Great Recession 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.
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Copyright information

© Springer-Verlag Berlin Heidelberg 2015

Authors and Affiliations

  1. 1.IABNurembergGermany
  2. 2.IAB, Nuremberg, IZA and Institute of Economics and EconometricsUniversity of RegensburgRegensburgGermany

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