Marcello Signorelli

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.

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).

Determinants of youth unemployment in Russian regions

In spite of a growing body of literature investigating the determinants of youth unemployment, studies at sub-national level are still scarce, especially for Russian regions. This article is an innovative attempt to analyse econometrically the key factors affecting the youth unemployment rate and the ratio between youth and total unemployment rates for 75 Russian regions in 2000–09. The existing literature on regional labour market performance and dynamics suggested the use of a large set of explanatory variables (with indicators of the level of economic development, the demographic situation and migration processes, and the export–import levels) in a GMM panel data analysis, taking into account both spatial correlation and endogeneity problems. Although we were searching for structural determinants, we also investigated the effect of the 2008–09 financial crisis. The econometric results, presented and discussed using several models, have key policy implications for both national and regional levels of government.

Youth Unemployment in Transition Countries and Regions

The reduction of youth unemployment and the building of employment pathways is a key target of the European Employment Guidelines, within the framework of the European Employment Strategy. Beyond promoting more and better investments in human capital, the Guidelines, within the framework of the European Employment Strategy, also include targets for reducing early school leaving and a ‘new start’ within six months of unemployment for unemployed young people. Youth employment issues have also been given a higher profile in the Commission’s Strategic Guidelines for Cohesion for the period 2007–2013 as well as in the new European Social Fund regulation. In particular, in the 2007 Communication on promoting young people’s full participation in education, employment and society, the Commission stressed the need to promote youth labour market integration in the larger context of general employment policies (‘flexicurity’). Lastly, the Commission has adopted (April 27, 2009) a new EU strategy — entitled ‘Youth: Investing and Empowering’ highlighting that (1) young people are one of the most vulnerable groups in society, especially in the current economic and financial crisis and (2) in our ageing society, young people are a precious resource;1 in addition, the new strategy emphasizes the importance of youth work and defines reinforced measures for a better implementation of youth policies at the EU level.2

Economic Growth and Structural Features of Transition: Theoretical Framework and General Overview

The ‘Great Transformation’ that occurred in Eastern Europe after 1989 involved many spheres: institutional, political, social and economic. Even considering only the economic sphere — in addition to the overall transition to market economies — this transformation involved several structural changes, affecting economic growth and performance in many markets (with manifest effects in the labour market), as well as international relations with other regions of the world.

The Impact of the Global Financial Crisis and the Role of External and Internal Factors in Emerging Economies

ABSTRACT This article assesses the impact of trade, capital openness and institutions on emerging economies’ output loss during the “Great Recession.” The fixed-effect estimates of an unbalanced panel of 122 emerging countries observed from 2008 to 2010 yield three main results. First, trade openness has exacerbated output loss. Second, capital openness can help mitigate the negative impact of an external shock, but this is conditional on the level of financial development. Finally, the results also point out that the interrelations between financial and institutional development affect the crisis’s severity.

The Double Crisis in the Eurozone: Recession, Stagnation and High Unemployment

The chapter, after illustrating the main events characterising the global financial crisis and the Great Recession, reviews the (generally prompt) economic policy responses in the principal economies of the world. It then focuses on the sovereign debt crisis affecting some Eurozone countries, especially in the periphery, showing how the ‘spreads’ of the Portugal, Ireland, Italy, Greece, Spain (PIIGS) suddenly increased and contagion occurred. The impact on real economic activity is investigated by stressing the fall in aggregate demand and its components (with widening output gaps), and the dire consequences on unemployment, particularly of young people.

The EU’s Policy Response: Too Little Too Late

The chapter first illustrates the initial policy response following the sovereign debt crisis: despite the creation of the ‘save-State’ funds (European Financial Stability Facility, EFSF, and European Stability Mechanism, ESM), executed through the ‘troika’, the EU’s reaction was delayed and inadequate. The lack of effective crisis-management mechanisms (e.g. ‘Eurobonds’) is also emphasised. In regard to monetary policy, a complete account is provided of the ‘unconventional measures’ introduced by the ECB, including the Outright Monetary Transactions (OMT) plan, which has been crucial for ‘saving the euro’, and the quantitative easing (QE) adopted chiefly to fight deflation and reinforce economic recovery. The effectiveness of such measures has been limited also because the banking union is not yet complete. Finally, the EU’s structural policies (Lisbon agenda and ‘Europe 2020’ plans) are evaluated.