Characteristics and Macroeconomic Determinants of Youth Employment in Africa

Abstract The purpose of this paper is to present the characteristics of youth employment in Africa as well as investigate its macroeconomic determinants, with a view to proffering some solutions. Our empirical estimates, using available cross‐sectional data over the period 1991–2009 show that a nation's domestic investment rate is found to be positively and significantly associated with youth employment in the overall Africa and sub‐Saharan estimations. However, domestic investment rate is negatively and significantly associated with youth employment in North Africa. Government consumption expenditures negatively and significantly affect youth employment in sub‐Saharan Africa. Rising inflation is negatively and significantly associated with youth employment in North Africa. The level of real GDP per capita has a negative and statistically significant effect in both the overall Africa and North Africa youth employment. The quadratic term of real GDP per capita is positive in sign and significant only in the youth employment estimation for the whole of Africa. We find that real GDP growth positively and significantly affects youth employment in the overall Africa, sub‐Saharan and North Africa estimations. Other important variables considered are globalization indicators (FDI and trade openness), credit to the private sector, ICT infrastructure, education, demographic factors, institutionalized democracy, time trend, net oil‐exporting/importing country, and regional dummies. Key policy implications include increased productive domestic investment; promoting government expenditure effectiveness; reforming the fiscal systems for consolidation by all levels of government; effective regulation of FDI for domestic job creation; improvements in the diversification, competitiveness and value addition of African export commodities; encouragement of entrepreneurship and access to financing for the youth; greater productive infrastructure development; up‐skilling, better training and education for the low‐skilled workforce; the promotion of effective democracy that will design policies friendly to youth job creation; and efficient management of oil and other natural resources throughout the value chain.