Youth Unemployment in the Countries of Central and Eastern Europe. Is Okun’s Law Applicable?

Eugeniusz Kwiatkowski; Agnieszka Krzętowska

doi:10.18778/1508-2008.29.08

Authors

Eugeniusz Kwiatkowski Warsaw University of Technology, College of Economics and Social Sciences, Plock, Poland https://orcid.org/0000-0001-9030-1664
Agnieszka Krzętowska Warsaw University of Technology, College of Economics and Social Sciences, Plock, Poland https://orcid.org/0000-0001-9518-2481

DOI:

https://doi.org/10.18778/1508-2008.29.08

Keywords:

youth unemployment, Okun’s law, Central and Eastern Europe, panel regression

Abstract

This article investigates the empirical validity of Okun’s law regarding youth unemployment in 11 Central and Eastern European countries between 2000 and 2023. Using panel data disaggregated by age cohorts and gender, the study employs robust linear regression models (RLM) with Huber loss functions and two-way fixed effects models (TWFE). Focusing primarily on the 15–24 age cohort, the results confirm a statistically significant, negative relationship between economic growth and youth unemployment, with considerable heterogeneity across countries and gender groups. While Okun’s law holds strongly in the Baltic states and Poland, the relationship is notably weaker in Hungary and Romania. The study also shows that higher shares of temporary employment and higher Employment Protection Legislation (EPL) indices for regular employment reduce the sensitivity of youth unemployment to changes in GDP, whereas higher youth enrolment rates and higher EPL indices for temporary employment increase this sensitivity.

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