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Pregled bibliografske jedinice broj: 864854

European youths in the crisis: substitution vs. income effect

Botrić, Valerija; Tomić, Iva
European youths in the crisis: substitution vs. income effect // 5th European User Conference for EU-Microdata
Mannheim, Njemačka, 2017. (predavanje, međunarodna recenzija, neobjavljeni rad, znanstveni)

European youths in the crisis: substitution vs. income effect

Botrić, Valerija ; Tomić, Iva

Vrsta, podvrsta i kategorija rada
Sažeci sa skupova, neobjavljeni rad, znanstveni

5th European User Conference for EU-Microdata

Mjesto i datum
Mannheim, Njemačka, 02.-03.03.2017

Vrsta sudjelovanja

Vrsta recenzije
Međunarodna recenzija

Ključne riječi
Youth unemployment ; added worker effect ; discouraged worker effect ; European economies

Although the financial crisis that erupted in 2008 has had adverse effect on the labour market outcomes for most of the European population, in particular for youths, little evidence has been given to support the reaction of the young to the adverse conditions their households are facing due to the crisis. The main aim of this paper is to explore the response of youths to negative effects of the crisis on their families in Europe. It is assumed that the recession could have affected young people’s participation on the labour market in two different ways: (i) they could have decided to prolong or stay in education instead of participating on the labour market and thus increase their chances for future employment (when the economy recovers) or (ii) they could have decided to increase their participation on the labour market because the recession affected their household income when some other (older) household members were left without their job. In the first case we have substitution effect, human capital effect or discouraged worker effect, while in the second case we have income effect or added worker effect. By using the EU Labour Force Survey (EU-LFS) data in the period 2009-2014 we focus on the first case, i.e., we explore the probability of young adults (15-29) changing their labour market status from (i) inactivity to activity ; (ii) inactivity to employment ; (iii) inactivity to unemployment in response to different changes in their parents’ labour market status, i.e.: (i) both parents losing the job ; (ii) one of the parents losing the job, (iii) both parents becoming inactive, (iv) one of the parents becoming inactive, (v) both parents remaining unemployed. We divide the sample into low unemployment (Western Europe) and high unemployment (Southern Europe) countries, to incorporate different institutional (welfare system) setting and the notion that youth decision making process might be systematically different when faced with unfavourable local economic conditions. Estimation is carried out both on the overall and on restricted youth (15-29) samples, defined by the transitions of the young persons’ parents. The analysis has revealed significant response of youth transitions on the labour market when parents’ transitions are taken into consideration. There are important differences between European economies: transitions of youths are more responsive to transitions of their parents in low unemployment countries (Western Europe), although there is a lower share of those that live in the same household with their parents in these countries. However, there seems to be a clear added worker effect present for young persons living in the same household with their parents in high unemployment countries. When considering youths who have made transition in response to one of the parents losing a job or becoming inactive, similar predictors are important in low and high unemployment countries: higher education of young individuals and family conditions, i.e., the share of financially dependent or working household members. This, rather novel, approach in studding the problem of youth unemployment in Europe can be of a great value for both the academics and practitioners. Deeper insights about the process of decision making of youth population to participate or not to participate on the labour market should further improve policy initiatives from both the EU and national level, while at the same time preserving academic discussion on the patterns of youth participation in the labour force.

Izvorni jezik

Znanstvena područja

Presenter: Iva Tomić. The paper is part of the project ZAMAH - The Impact of the Recession on the Structure and Flow of Youth Unemployment in Croatia (HR.3.2.01-0136) that has been funded with the support of the European Social Fund (ESF) which is a part of the European Union (EU) Structural Funds. The paper reflects the views only of the author(s) and none of the institutions cited above can be held responsible for any use which may be made of the information contained therein. We would also like to thank Professor Vassilis Monastiriotis (LSE) for some comments and ideas at the very early stage of this research.


Projekt / tema

Ekonomski institut, Zagreb