Labour market flexibility, economic crisis and youth unemployment in Italy

Abstract

The rise in the unemployment rate across European countries has been one of the most evident effects of the economic downturn. The aim of this paper is to investigate: 1) the impact of economic crisis on youth and adult unemployment in Italy; 2) whether the labour market reforms have mitigated or strengthened the negative effect of the economic crisis on youth unemployment; and 3) which economic and institutional variables contribute to reducing unemployment. Econometric results, using data from the twenty Italian regions from 2001 to 2016, confirm that the economic crisis has had detrimental effects mostly on young people. Moreover, the paper shows no evidence that greater labour market flexibility improves youth unemployment outcomes. Regarding the other control variables, the regional export, ALMPs, regional political participation, increase in average wages, private investment and regional productivity contribute to mitigating the impact of a recession on youth and adult unemployment.