Can institutional factors and government policies mitigate the impact of economic shocks on young people’s employment prospects? The case of NEETs

Abstract

Numerous empirical studies have highlighted the important role played in European countries by macro-economic factors, such as institutional and structural contextual ones, in order to face the impact of economic shocks on growth in the number of NEETs (Not in Education, Employment or Training). The findings have revealed a rather heterogeneous framework at European level with some questions still open which the present paper attempts to answer. In particular, this paper explores, by means of a Principal Component Analysis, which macro-economic, institutional and contextual factors have more than others contributed to a decrease in the vulnerability of countries during the recent economic crisis, in terms of NEETs, and if the same factors also allowed recovery in the post-crisis period, therefore contributing to a substantial reduction in NEETs. This issue is particularly relevant in the European policy debate since, as the Council of European Union has pointed out, a significant rate of NEETs, that is young people at great risk of social exclusion, is expected to have negative effects on the economy and very high costs for Europe. The results call for more detailed reflection on those active labor market policies and appropriate strategies, to be shared at European level, which could stimulate demand for young employees for reducing the occurrence of NEETs. The analysis focuses on the decade 2004 -2014 in order to cover a complete economic cycle.