Social Investment and Youth Labour Market Participation

In this paper, we first rely on small area techniques to derive from EU statistics on income and living conditions (EU-SILC) survey new indicators of compensatory and social-investment policies at regional level. While compensatory policies have mainly the goal of protecting individuals from “old” risks (e.g., old-age), investment-related social policies tend to focus more on “new social risks” (e.g., skill deficits). We rely on these new indicators to perform a data-driven structural vector autoregressive (SVAR) analysis to investigate the causal relationships between youth labor market outcomes and these two types of spending. Our results support the view that social-investment policies are effective for tackling new social challenges. (JEL C18, C54, E02)