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Abstract
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.
Acknowledgements
An earlier version of this article was presented at the EACES-AISRe Workshop on ‘The Regional Labour Market Impact of the recent crisis’ (University of Turin, 17 September 2011). We would like to thank several participants in the workshop for useful comments and suggestions, in particular, Laura Resmini and the discussant Juergen Bierbaumer-Polly. The article benefited greatly from the comments of an anonymous reviewer and from the suggestions of Tomasz Mickiewicz. The usual disclaimer applies.
Notes
1. Unlike in the Central and Eastern European countries, in the Russian case the correlation between changes in GDP and employment dynamics has been very weak. In this study we do not develop this point, related to analysis of the coefficients of Okun's Law, because the latter is not implementable for a particular unemployment rate (like youth unemployment); additionally, our dependent variable refers to the level of unemployment (not variation) over time.
2. For a more complete definition of youth unemployment and some measurement aspects see ILO (Citation2009). See the empirical evidence presented in ILO (Citation2010a, Citation2010b).
3. In other words, a lower and/or decreasing youth employment rate is significantly related to high(er) schooling participation. Obviously, in interpreting empirical evidence, it should also be remembered that the youth unemployment rate is affected by problems of the definition of ‘active search for work’ and of the discouragement effect (e.g. Perugini and Signorelli Citation2004, Citation2007).
4. As mentioned above, the existence of a youth experience gap enhances the higher employability of adults with generic and sector-specific skills vis-a-vis youngsters.
5. The higher diffusion of temporary contracts amoung youngsters leads to the adoption of a sort of ‘last-in first out rule’.
6. Thus, the high diffusion of temporary contracts is a key explanation of the higher business cycle sensitivity of young people in the labour market. However, many authors (e.g. Cockx and Picchio Citation2009, Scarpetta et al. Citation2010) also note that, for many young people, temporary contracts, especially apprenticeships, are more often a stepping stone to permanent contracts than a trap. The trap effect of temporary contracts seems to be higher in countries with a large difference in the stringency of regulations for permanent contracts (i.e. strict employment protection legislation) compared with temporary or other atypical contracts.
7. According to Scarpetta et al. (Citation2010), the size of the group of ‘youth left behind’ can be proxied by the number of young people who are neither employed nor in education or training (NEET). This group represented 11% (on average) of 15–25 year olds in the OECD in 2007.
8. Considering the complex relationship between unemployment, employment and participation rates (see for example Perugini and Signorelli Citation2004, Citation2007), it should be noted that – especially during and after a crisis – the increase in youth and total unemployment rates can understate the negative impact if the possible decrease in youth and total participation rates is not adequately considered. This is the well known discouragement effect (usually more relevant for women) that produces a reduction in the actual labour force and, especially in the case of young people, can partly take the form of an increase in the duration of ‘education’.
9. They present econometric results concerning the impact of the 1998–99 Russian crisis in addition to the evidence on the initial impact of the recent crisis.
