It's the Youth, Stupid : Explaining Labour Market Policy Reactions to the Crisis

The global financial and economic crisis that has persisted since 2008 has triggered massive increases in unemployment in almost all Western industrialized nations. Consequently, in 2009, about half of the OECD countries tried to curb the increase in unemployment by introducing or expanding jobs in the so-called second labour market by means of direct job-creation measures. Why did the OECD countries opt for different types of interventions in the labour market in light of the financial crisis? In order to answer this question, we proceed in two steps. By applying a discriminant analysis, we first note that the fiscal scope and the increase in youth unemployment were the decisive predictors for direct job-creation measures. Subsequently we compare the changes in the labour market policies in three most different systems, namely Germany, Sweden and the United Kingdom