This paper analyses the economics and demography of the youth bulge—how youth demography is changing and how it affects youth unemployment—using data for 154 countries. It finds that the simple relationship between youth bulges and youth unemployment across countries and within countries over time is very weak.
Estimating regressions including year-fixed effects and country-fixed effects, however, the authors find a strong positive relationship between the growth rate of the working-age population and youth unemployment. This suggests that the youth bulge may be an important factor in youth unemployment, with the growth rate of the youth population being more important than the youth share of the working-age population.
Key Findings:
- The youth bulge is unlikely to play a major role in understanding the current challenges in youth unemployment.
- There is very little relationship between youth’s share of the working-age population and the youth unemployment rate when compared across countries. The regression estimate of this cross-section is actually negative and highly significant.
- Results estimate a negative relationship between youth ratios and youth unemployment when looking at the change over time within countries. When country- and year-fixed effects are included, estimates are close to zero and are usually statistically insignificant.
- When looking at the growth rate of the youth population as a determinant of youth unemployment, it also has a negative relationship to youth unemployment in the cross-section. When both year-fixed effects and country-fixed effects were included, however, a statistically significant positive effect of the youth growth rate on the youth unemployment rate exists. This is true in both the full set of countries and in developing countries, and it is true for both male and female unemployment.
- The estimated impact of the youth growth rate is higher in developing countries. For males an estimated increase in the growth rate of one percentage point would increase youth unemployment by 4.7%. Since many countries have experienced declines of 3-4% in the growth rate of the youth labour force, this is a potentially important effect.
- If there has been such an impact on youth unemployment it unfortunately seems to have been offset by other factors. The pattern for most of the world has been declines in the growth rate of the youth labour force coinciding with increases in youth unemployment.
