The Impact of Financial Crises on Youth Unemployment Rate

Misbah Tanveer Choudhry, Enrico Marelli and Marcello Signorelli

No 79/2010, Quaderni del Dipartimento di Economia, Finanza e Statistica from Università di Perugia, Dipartimento Economia

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.

Keywords: crises; labour impact of economic crises; youth unemployment; panel fixed effects. (search for similar items in EconPapers)
JEL-codes: C23 G01 J21 J29 J69 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2010-10-15
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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