Youth Unemployment in Advanced Europe: Okun’s Law and Beyond

By Angana Banerji, Huidan Huidan Lin, Sergejs Saksonovs

January 21, 2015

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Angana Banerji, Huidan Huidan Lin, and Sergejs Saksonovs. Youth Unemployment in Advanced Europe: Okun’s Law and Beyond, (USA: International Monetary Fund, 2015) accessed December 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

The crisis has intensified what was previously a chronic unemployment problem in Europe; youth unemployment is now at unprecedented highs in some European countries. This paper assesses the main drivers of youth unemployment in Europe. It finds that much of the increase in youth unemployment rates during the crisis can be explained by output dynamics and the greater sensitivity of youth unemployment to economic activity than adult unemployment. Labor market institutions also play a significant role in explaining the persistently high levels of youth unemployment, especially the tax wedge, minimum wages relative to the median wage, spending on active labor market policies, the opportunity cost of working (measured by the unemployment benefits), vocational training, and labor market duality. This suggests that policies to address youth unemployment should be comprehensive and country-specific, focused on reviving growth and advancing labor market reforms.

Subject: Employment, Labor, Labor markets, Output gap, Production, Unemployment, Unemployment rate

Keywords: Business cycle, Documents labor market dynamics, Employment, Europe, Global, Labor market duality, Labor market factor, Labor market factors, Labor market feature, Labor market outcome, Labor market variable, Labor markets, Okun’s law, Output gap, Paper documents labor market dynamics, Product market, Product market feature, Replacement rate, Replacement ratio, Unemployment, Unemployment rate, WP, Youth employment, Youth employment condition, Youth unemployment

Publication Details

Pages:

38
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2015/005
Stock No:

WPIEA2015005
ISBN:

9781498382519
ISSN:

1018-5941

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