The determinants of youth unemployment. A panel data analysis

The school-to-work transition represents a long dark tunnel for too many young people all over the world. Nonetheless, cross-country differences are striking: in Germany, young people fare no worse than their adult counterparts, while in the South- and Eastern-European Union countries young people fare from 3 to 4 times worse than their adult counterparts. This essay points to the youth experience gap as a key concept: countries dramatically differ in their strategies to cover the youth experience gap, which remains high even in a time of ever increasing education attainment. Five different country groups are detected whose outcomes in terms of youth unemployment are dramatically different: a) the North-European; b) the Continental European; c) the Anglo-Saxon; d) the South-European; e) the New Member States. For the first time, this essay provides evidence based on panel data analysis. Our final specification is a dynamic model with control for endogenous variables to explain the role that different educational systems vis-à-vis labor market institutions have in affecting the youth absolute and relative disadvantage. We find that the European Continental and the Anglo-Saxon system perform much better also after controlling for per capita GDP level and growth, as well as for labor market and educational institutions.