Still With Us After All of These Years: Trends in Youth Labour Market Entry, Home-Leaving and Human Capital Accumulation in Italy 1993-2003

Abstract

In this paper I examine a number of issues related to the Italian youth labour market and, in particular, youth labour market entry, over the last decade or so. The Italian youth labour market has a number of characteristics, present to a degree in other countries, but which by their pronounced character mark it apart from other European Countries. The analysis presented here is essentially motivated by concern with two of these: a) the very high youth unemployment rate, and, above-all high ratio of youth to adult unemployment rates; and b) the strong and increasing tendency for youngish Italians to remain in the parental home. The paper takes a broad approach to the analysis of these questions looking first at time trends in labour market entry, human capital accumulation, home leaving and family formation on the basis of information contained in the Italian Labour Force Survey using also the Bank of Italy's Survey on Household Income and Wealth. The analysis also employs a broad definition of young people which is extended to include young people up to 34 years old rather than the conventional definition using only 15-24-year-olds. Reduced form panel estimates of the determinants of the behavioural variables are derived. The approach adopted is close in spirit and methodology to the work undertaken by Card & Lemieux (2000) in the North American context, O'Higgins (2003) on global trends and O'Higgins (2005) in the Italian context. It is complementary to the recent studies of home leaving and labour market entry in Italy which tend to concentrate on single specific determinants of, for example, home-leaving such as in Becker at al. (2004) on the impact of job uncertainty or Mannacorda & Moretti (2004) on the impact of parental income. The analysis identifies a substantial impact of labour market conditions in shaping young people's choices. The results also highlight the importance of distinguishing the effects of these aggregates by age and throw some light on the interrelationship between the phenomena under study. It may be seen as a first step in a broader research programme aimed at identifying the central factors driving young people's transition choices in recent years.