An empirical study of factors influencing total unemployment rate in comparison to youth unemployment rate in selected EU member-states

Abstract

The issue of youth unemployment rate in the heavily indebted and less developed EU countries is currently on the margins of both media interest and policy debates. This paper compares the influence of several economic variables on the total unemployment rate and the youth unemployment rate. The countries that are studied are three countries with the highest youth unemployment rate: Greece, Croatia and Spain, and three countries with the lowest youth unemployment rate: Germany, Denmark and the Czech Republic. By implementing an Autoregressive Distributed Lags (ARDL) approach, this paper concludes that the youth unemployment rate is significantly more affected by the increase of the public debt-to-GDP ratio in comparison to the total unemployment rate in Croatia and Spain. This paper finds significant differences in the factors that impact youth unemployment rate in comparison to total unemployment rate. Notably, the impact of economic growth is far stronger in decreasing total unemployment rate than youth unemployment rate. The main conclusion of this paper is that there should be a new European economic framework that will focus on combating rising youth unemployment rate in order to avoid potentially dangerous consequences and restore faith in the EU and national institutions which has still not recovered from the 2008 crisis.

Keywords

• macroeconomic imbalances
• ARDL Bounds testing
• 2008 Economic Crisis
• youth unemployment