Trade Openness and Youth Employment in Sub-Saharan Africa: Should We Regulate the Labor Market?

Abstract

This study analyzes the effect of trade openness and labor market regulation on youth employment in Sub-Saharan Africa (SSA). It covers a panel of 41 countries over the period 2002-2017, a period determined by the availability of the relevant data on labor market regulation. The results obtained using pooled ordinary least squares (OLS) regression and instrumental variable-two-stage least squares (IV-2SLS) estimators reveal that trade openness and labor market regulation rigidity have a positive and significant impact on youth employment in SSA. More interestingly, trade openness negatively and significantly affects youth employment in more rigid labor markets in SSA. This result remains robust in several robustness tests. Finally, this study also examined the case of young women’s employment in SSA.