Youth unemployment and quality of education in the MENA : an empirical investigation

The Middle East and North Africa (MENA) region has the highest rate of youth unemployment worldwide. High records of youth unemployment have increased the risk of political instability and other social concerns. Our study aims to investigate the role of quality of education in explaining the within country variation of youth unemployment in the MENA region. We use fixed effect regression methodology for a panel of 18 MENA countries from 2007 to 2017. Our results show a significant and robust negative (decreasing) effect of higher quality of education system on youth unemployment rate. This decreasing effect is robust to control of other drivers of youth unemployment, country and year fixed effects. Including full set of control variables, we show that a one unit increase in perceived quality of education systems from the Global Competitiveness Reports is associated with approximately 4 percentage points decline in youth unemployment. Our general specification explains approximately 70% of within-country variation of youth unemployment rate in the MENA region. Among control variables, only trade openness and foreign direct investment (FDI) share of GDP show statistically significant (negative) association with youth unemployment, meaning that trade and foreign investment openness contribute to employment of youth in the region. We suggest some recommendations for policy makers in the region.