Determinants of youth unemployment in the EU : a panel data analysis

Abstract

The problem of youth unemployment is one of the most critical phenomena that every government seeks to understand and tries to minimise as much as possible. The fact that the youth unemployment rate is twice as high as the general unemployment rate shows how real this problem is. The aim of this study is to determine which main factors are affecting the youth unemployment rate in the member states of the European Union. The youth unemployment rate is important since this indicates a wasted economic resource. Although the EU has several schemes and initiatives, such as the Youth Guarantee, EU Youth Strategy, Youth in Action, EURES, etc, nonetheless the problem of youth unemployment persists in certain member states. The empirical research shows that relevant factors which can impact youth unemployment include economic growth, inflation, part-time employment, temporary employment and education. The data set used for this study was derived from Eurostat and includes data from 2008 until 2019 for 25 member states (Estonia and Lithuania had to be excluded from the econometric analysis due to lack of data). A panel data analysis was used in conducting the econometric analysis. The main conclusions derived from this study are that the most effective way to reduce the youth unemployment rate in the European Union is through increased economic growth, whereas the main factor that was found to impact the youth unemployment negatively was the share of youths employed on part time basis. The format of the study consists of 5 chapters. It starts off by the Introduction, followed by the Literature Review. Then, the methodology is explained prior to presenting the results and analysis. Finally, a conclusion of the study is presented.