Enrico Marelli

Youth unemployment rate and impact of financial crises

Purpose - The purpose of this paper is to assess the impact of financial crises on the youth unemployment rate (YUR). The authors consider different types of financial crises (systemic banking crises, non-systemic banking crises, currency crises and debt crises) and different groups of countries, according to their income level. Design/methodology/approach - After a review of the existing (theoretical and empirical) literature on the determinants of the YUR in general and at the occurrence of economic crises, the authors present empirical estimations on the impact of past financial crises on young workers. The relationship between financial crises and YUR is investigated by employing fixed effects panel estimation on a large panel of countries (about 70) around the world for the period 1980-2005. The “persistence” over time of the impact is also investigated. Finally the Arellano-Bond dynamic panel is estimated, confirming the significance of the results. Findings - According to the authors’ empirical estimates, two key results are relevant: financial crises have an impact on the YUR that goes beyond the impact resulting from GDP changes; and the effect on the YUR is greater than the effect on overall unemployment. The inclusion of many control variables – including in particular GDP growth – does not change the sign and significance of the key explanatory variable. The results suggest that financial crises affect the YUR for five years after the onset of the crises; however, the most adverse effects are found in the second and third year after the financial crisis. Research limitations/implications - Although fully aware of the peculiarities of the last crisis, the authors believe that the econometric results facilitate a better understanding of the impact of the 2007-2008 financial crisis on the youth labour market. Practical implications - The main policy implication is that effective active labour market policies and better school-to-work transition institutions are particularly needed to reduce the risk of persistence and structural (long-term) unemployment, since young people have been worst affected by the last crisis. Originality/value - There are many studies on the characteristics and causes of youth unemployment; considerable research has also been carried out into the labour market impact of financial crises. This paper brings the two strands of literature together, by econometrically investigating the impact of financial crises on YUR.

Regional Unemployment in the EU Before and After the Global Crisis

This article empirically assesses the evolution of European regions in terms of both employment and unemployment during the recent financial crisis and global recession. Our specific research questions are as follows: (i) has there been a reversal in employment and unemployment dynamics at a regional level during the crisis (2007–10) compared with the previous period (2004–07)? (ii) have the western regions (‘old’ EU states) behaved differently in response to the crisis compared with the eastern regions (NMS)? Finally, (iii) are the differences between the two groups of regions related to structural or institutional variables? After a review of the literature on the key determinants of regional unemployment, we summarise our main findings concerning the impact of the global crisis on the labour market. Our econometric investigation aims to answer the questions we pose. Structural characteristics are considered in terms of sector specialisation of regional economies. In addition, we consider certain institutional characteristics, by including indicators of the share of temporary workers and of long-term unemployed. Our analysis is then targeted at sub-samples of western and eastern European regions: we show that the critical factors for labour market performance during the crisis in these two groups differ greatly. From a methodological viewpoint, we exploit a spatial filtering technique which allowed us to greatly reduce any unobserved variable bias – a significant problem in cross-sectional models – by accounting for latent unobserved spatial patterns.

Regional Employment Dynamics in the EU: Structural Outlook, Co-Movements, Clusters and Common Shocks

This paper considers the evolution of employment across 145 European regions (between 1983 and 1997) at a level of industrial disaggregation greater than that usually considered in the literature. The results highlight that, in the first place, national boundaries are not particularly significant in singling out clusters of regions with similar patterns of employment growth, notwithstanding the country-based economic policies and labour market reforms. What matters is industrial structure: structurally similar regions are to be found in different countries that are not necessarily spatially adjacent. A second finding is that the degree of correlation of manufacturing employment across countries and regions is higher than the correlation of aggregate employment. Third, while the evidence confirms that there is a growing integration among the European regions, it does not corroborate the existence of a core regions located in Northern Europe with more uniform employment dynamics. The key policy implication is that the weight of idiosyncratic elements, i.e. the purely regional component of employment dynamics, points up the inadequacy of a common monetary policy, unless non-monetary policies, either fiscal or structural, are targeted to the needs of specific countries and regions.

Youth and total unemployment rate : the impact of policies and institutions.

This paper estimates the impact of several institutions and policies on youth and total unemployment rates for a large set of developed countries during the last three decades. The estimation technique used is a fixed effect panel analysis. Our empirical analysis shows that, in addition to economic growth, economic freedom, labour market reforms, a high share of part time employment, and active labour market policies reduce unemployment and improve labour market performance. Considering the poor condition of young people relative to older people, our results permit us to select, among the policies and reforms that reduce overall unemployment, the policies that have a comparatively high effect on youth unemployment.

Employment, productivity and models of growth in the EU

Purpose - The purpose of this paper is to identify the main “models of growth” characterising the EU countries in the last two decades, with particular reference to the employment-productivity relationship, and to reveal the key determinants of productivity. Design/methodology/approach - After a survey of the relevant literature, the empirical section analyses the “models of growth” by graphical inspection, identifying four models (for EU-27 in the 1990-2008 period): extensive, intensive, virtuous, and stagnant. Then different econometric investigations (beta convergence, dynamic panel with GMM estimation, fixed effects panel, cross-section) are used to test the “diminishing returns of employment rate” hypothesis (for the 2000-2006 period), to assess the convergence processes and to determine the key variables affecting productivity. Findings - The main finding is the confirmation of the hypothesis mentioned: high employment growth is likely to lead to slower productivity growth. Moreover, besides verifying the beta convergence of productivity per worker, the most significant determinants of productivity are the following: education, a transition index, some structural indicators, and a “shadow economy” proxy. Finally, the descriptive analysis shows that “old” EU countries, coming from two decades of “jobless growth”, shifted to an “extensive” growth model; in contrast, transition countries (NMS) followed the opposite path: reducing employment and raising productivity. Research limitations/implications - It would be advisable to extend the period of the analysis, as soon as new data become available. Practical implications - The main policy implication is to get the EU Lisbon strategy – i.e. to create “more and better” jobs – working effectively. Originality/value - The most original finding is the clear assessment of an employment-productivity trade-off. Also, the different models of growth are categorised simply and effectively.

Transition, Regional Features, Growth and Labour Market Dynamics

The aim of this paper is to throw some light on the institutional change, regional features, and growth and labour market performances in the eight transition countries that became EU members in May 2004 (8-CEECs).

Youth Unemployment: Key Determinants and the Impact of Crises

This chapter discusses the impact of various factors on the youth unemployment rate (YUR) with respect to the total unemployment rate. In particular, we use different fixed effect panel models to estimate the role played by macroeconomic and structural conditions (e.g. GDP growth rate, inflation, real interest rate, demographic variables, education), financial crises, institutions and policies (e.g. labour market reforms, ALMPs, overall economic freedom). The econometric analysis is based on a panel of OECD countries for the period 1981–2009. Our empirical analysis confirms the expected role of macroeconomic and structural conditions; it shows the additional effect of financial crises; and it underlines the key importance of various institutions and policies. Most importantly, our results prove the differing magnitudes of the impacts of the above-mentioned factors on youth unemployment with respect to the total unemployment rate. These results have major policy implications also in consideration of the still rising level of youth unemployment, especially in Europe.

Labour, productivity and growth: an introductory essay

Purpose - The purpose of this paper is to introduce the special issue on “Labour, productivity and growth”. Design/methodology/approach - The paper discusses the articles in the special issue, which investigate the main theme – labour, productivity and growth – from different points of view by employing a variety of econometric methods. These include improvement of the evaluation of the impact of labour market flexibility on economic performance, analysis of the macroeconomic law of decreasing returns to labour, a new panel co-integration method, and a reinterpretation of co-integration analysis to assess the impact of incomes policy. Institutional variables, in particular the system of industrial relations, are duly considered. Findings - The papers in the special issue highlight different causes of sluggish economic (productivity) growth in Europe, in the light of not only traditional macroeconomic variables, such as total factor productivity and labour market flexibility, but also such factors as neo-corporatist industrial relations and management practices, which are generally neglected in the literature. Originality/value - The paper introduces a number of articles proposing innovations in the interpretation and application of a wide range of theoretical approaches and econometric methodologies. It also discusses several policy suggestions for fighting sluggish productivity growth, including investment in research and development, human capital, flexicurity, innovative industrial relations practices and high-performance workplace practices also considered capable of affecting macroeconomic performance.

The short- and long-run impacts of financial crises on youth unemployment in OECD countries

ABSTRACT The impact of financial crises on the youth unemployment rate (YUR), compared to the total unemployment rate (UR), is estimated for a panel of OECD countries over the period 1981–2009, using bias-corrected dynamic panel data estimators of short- and long-run coefficients. Both YUR and UR are found highly persistent. Also, short- and long-run effects of financial crises on YUR are significantly large, respectively, some 1.9 and 1.5–1.7 times higher than the short- and long-run effects on UR. Similar results are found for the unemployment impacts of GDP growth lagged 1 year and institutional variables. These results are robust to various dynamic specifications.

Globalisation and local labour markets

This paper begins with a review of the literature on the labour market’s impact of globalisation.An interesting case-study is provided by the province of Brescia, an industrial area in Northern Italy, where both de-localisation and immigration have been two important means of reducing the pressure of labour demand on the locally scarce human resources.The conclusion is that, in order to preserve competitive positions in the long run, it is worthy to consider the qualitative consequences, e.g. the indispensable changes in the structure of production, rather than focusing on the quantitative effects on domestic employment.