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Prepared by Sidonia McKenzie and Jose Torres.
Between 1992–2005, wage negotiations were done at the firm-level.
In fact, Brazil, Italy, Spain and South Africa have higher youth unemployment than Uruguay but this is partly explained by a higher overall unemployment. Whereas in Italy, Portugal, Argentina, and Uruguay youth unemployment is high although the headline number is relatively low.
Youths are also much less likely to work for the government where employee benefits are usually higher relative to private firms. This further limits their opportunity to receive employment protection.
For example, (Baneriji, Saksonovs, Lin, & Blavy, 2014) find that in OECD countries vocational training lowers youth unemployment by around 0.3 percentage points.
As far we know, this is the first paper to examine the reasons for dual labor market conditions between the young and adults. Previous related studies have employed difference-in-difference techniques to determine labor reallocation impacts or worker turnover from institutional reforms in European countries (such as Hijzen, et al. 2017; Bassanini and Garnero, 2013; and Centeno and Novo, 2012).
There are seven age groups (15–17; 18–21; 22–24; 25–29; 30–54, 55–60 and 61 and over) and four educational levels (primary, secondary, some tertiary and graduate level).
This might imply that age is highly correlated with other characteristics which are not controlled in the single-equation estimates of Okun’s Law. This result remains if we replace the GDP growth with the output gap (as in the Okun law estimates).
The explained and unexplained portions are estimated using a Oaxaca-Blinder decomposition, which breaks unemployment differentials per age group between Uruguay and a pooled sample of LA5 countries into differences in endowments and returns. The latter is often interpreted as a measure of labor market discrimination (Jann, 2008). Thus, the explained portion is the unemployment rate that would be expected given Uruguayan endowments per age group if the returns to those characteristics were the same as in the average LA5 country.