Institutions Matter: Active Labour Market Policies and Youth Employment Across Development Levels in Europe

This study examines the effects of active labour market policies (ALMPs) implemented in European Union countries during the 2009–2021 period on youth employment. The main objective of the research is to analyse the relationship between policy intensity and the youth employment rate within the context of structural variables such as the level of economic development, human capital indicators, and the NEET rate. A panel data set comprising 27 European countries was used in the study, and panel data models including country and year fixed effects were estimated. In the model, the dependent variable is the youth employment rate, while the explanatory variables include ALMP intensity, per capita income, higher education rate, and NEET rate. The findings indicate that the higher education rate is the strongest determinant of youth employment, whereas the NEET rate significantly reduces employment. Furthermore, the policy effect after the Youth Guarantee varies depending on the NEET rate, and the effectiveness of policies remains constrained in countries with higher NEET rates. In conclusion, it is emphasised that policies aimed at increasing youth employment should rely not only on the level of expenditure but also on the education system, institutional capacity, and coordination of social policies.