Can welfare and labour market regimes explain cross-country differences in the unemployment of young people?

Abstract

No single institution can reduce (long-term) youth unemployment. Welfare and labour market institutions function as “bundles”, through multiple inter-institutional synergies. Based on a focused literature review for theory and on cluster analysis for empirics, the author identifies five such regimes across the EU-27 and estimates their effects on the youth unemployment ratio and on long-term youth unemployment. The most helpful institutional arrangement for young people in the labour market would be a combination of strong dual apprenticeship embedded in a corporatist labour market regime with high levels of social security, active labour market policy, and spending on education and childcare.