Regional youth employment: trends, drivers and the impact of the knowledge economy and decarbonisation

This paper uses micro-data from the European Labour Force Survey to construct a novel regional panel to examine youth employment for Italy, Spain, Greece and Ireland over 2008–2021. Youth employment has been especially vulnerable to economic shocks in these peripheral European economies. Youth employment rates declined sharply during the Great Recession, particularly in Greece and Spain, followed by Ireland and Italy. After 2014, recovery took hold, but the COVID-19 crisis triggered another downturn before renewed improvement. To assess regional cohesion, we apply a Barro regression framework to test for convergence or divergence, and use fixed-effects panel models to examine the determinants of youth employment. Results indicate divergence at a rate of 7.6% between 2008 and 2014, followed by convergence at 5% thereafter, suggesting improving cohesion. In terms of the drivers, regional youth employment is negatively affected by brown and knowledge-economy sectors, particularly in regions undergoing decarbonisation. We find evidence to support policies aimed at improving overall labour force participation and promoting tertiary education as a means of enhancing youth employment. Regional GDP per capita also has a positive effect. These findings highlight the importance of targeted policy interventions to support youth employment during times of economic downturn and environmental transition.