Youth Unemployment and Underdevelopment in Honduras

Abstract

This paper analyzes the determinants and consequences of youth unemployment in Honduras. The study is based on the estimation of error correction models that express youth unemployment in terms of real sector variables. The results indicate that exports, remittances and self employment reduce youth unemployment, while the expansion of the service sector increases it; other results show that youth unemployment is susceptible to economic activity in the other Central American countries, specifically to economic growth in Guatemala, El Salvador and Nicaragua. Youth unemployment exerts negative impacts on Honduras’ productivity and on economic growth. The study also highlights the role of education on preventing youth unemployment and the importance of designing a Youth Agenda that would comprise several initiatives that are of special value to Honduran youth. It is hoped that these results would motivate policy makers and society in general to increase investments in the human capital areas so that youth avoid falling into the traps resulting from unemployment.