Abstract
In this introduction to the symposium, we review the key determinants of youth unemployment in order to better understand the theoretical and empirical framework of the four papers in the symposium. In addition, we briefly discuss some recent evidence on the youth unemployment rate and NEET indicator (percent of young people who are neither employed nor in education or training) in many countries before summarizing the key results and policy implications of the papers included in the symposium.
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Notes
We note that, as for labor economics in general, the theoretical and empirical studies are either macro or micro oriented. Three papers in this symposium use aggregate data, but the paper on transitions uses micro data. Another distinction is the analysis of stocks or flows, and only the paper on transitions examines flows into and out of unemployment. Moreover, the focus here is on the unemployment condition and its persistence over time, not on other topics concerning youth and the labor market.
In the United States, where unemployment reached a proportion as high as one quarter of the labor force, the fiscal policies of President Roosevelt helped to reduce it.
This group of variables also reminds us that aggregate models are often unsuited to represent in an appropriate way the functioning of real labor markets that are characterized by dualism, heterogeneities and so on.
In the case of educated people, the brain drain is harmful for the countries of origin because it reduces potential growth. In the past it mainly affected developing countries, but, after the recent economic crisis, it also affects many peripheral countries in Europe.
Also a record of employment, for example in temporary jobs rather than permanent ones, plays a role in transitions from unemployment to employment (Dolado et al., 2013).
This line of research also led to more work on the structural and cyclical determinants of youth unemployment (Bruno et al., 2014a; Marelli et al., 2013; Demidova et al., 2013; Choudhry et al., 2012; Demidova and Signorelli, 2012).
In fact, according to Choudhry et al. (2012), financial crises may continue to affect youth unemployment up to 5 years after their onset.
As for the key reasons of the Eurozone crisis and on the necessary innovative institutional and economic policies, see Marelli and Signorelli (2014a). Regarding macroeconomic policies, not only should EU fiscal rules (Fiscal Compact, Stability Pact etc.) be enforced in a more flexible way, otherwise the austerity measures mandatory for many countries at the same time contribute to the current stagnation situation. Moreover, monetary policy, which since 2012 has been able to calm financial markets after President Draghi’s declaration ‘we shall save euro whatever it takes’ and the launch of the ‘outright monetary transactions’ plan, should become even more accommodating, for example following an approach similar to the quantitative easing program successfully implemented by the Fed in the United States over the last 5 years. Unconventional monetary policy is even more important in this moment when deflationary conditions tend to prevail. On the contrary, as we have seen in the previous section in discussing the paper by Caporale and Gil-Alana (2014), a bit of inflation is helpful in reducing unemployment.
Otherwise the common currency, the euro, may disappear not only because of financial problems, such as high public debt, solidity of banks, functioning of the credit system and so on, but rather from the macroeconomic conditions of the member economies: recession and stagnation, deflation, high unemployment, especially among the youth and so on. Marelli and Signorelli (2014b) present some proposals for avoiding stagnation and persistent unemployment in the Eurozone.
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Brada, J., Marelli, E. & Signorelli, M. Introduction: Young People and the Labor Market: Key Determinants and New Evidence. Comp Econ Stud 56, 556–566 (2014). https://doi.org/10.1057/ces.2014.30
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DOI: https://doi.org/10.1057/ces.2014.30