## 1. Unemployment Statistics, 2010

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---

### Introduction and purpose
- Purpose: analyze unemployment and labor market developments in Algeria and assess factors that may hamper employment creation, including estimates of employment-GDP elasticities by sector and age group and the effect of labor market flexibility on unemployment.
- Main inference: relatively low employment-GDP elasticities and a relatively rigid labor market explain much of Algeria’s high youth unemployment; improvements in labor market flexibility could significantly reduce unemployment in the short and medium term.
- Structure: descriptive statistics; GDP-employment elasticities; labor market flexibility impact estimates; stylized medium-term scenarios; policy implications.

### Stylized facts on Algeria’s labor market
- Overall unemployment rate:
  - Fell from 30 percent in 2000 to 10 percent in 2010.
- Demographic and participation trends:
  - Fertility rates: declined from 5.8 percent in 1985 to 2.4 percent in 2007.
  - Population growth: declined from 3.1 percent to 1.5 percent over the same period.
  - Labor force growth (additional demand for jobs): average of 4.2 percent over 1991–2000; average of 2 percent over 2001–10.
  - Employment growth: average of 2.9 percent in 1991–2000; average of 4.7 percent in 2001–10.
- Unemployment composition and persistence:
  - Youth unemployment: 21.5 percent.
  - Female unemployment: 19 percent.
  - Unemployment for people with higher level of education: 20 percent.
  - Duration: almost 50 percent of unemployed have been seeking a job for more than two years.
- Labor market rigidities and skill mismatches:
  - Labor market favors insider versus outsider workers.
  - Mismatch between supply of graduates (fields such as humanities, social sciences, law and education) and private sector demand for skills.
  - Low job turnover and long-term unemployment reduce effectiveness of active labor market policies.

### Key statistics (selected tables, 2010)
- Table 1. Unemployment Rate by Age Group and Gender
  - Overall: Overall 10.0; Male 8.1; Female 19.1
  - Young (16-24): Overall 21.5; Male 18.6; Female 37.4
  - Adults (25 and +): Overall 7.1; Male 5.4; Female 15.0
- Table 1. Unemployment by Degree of Instruction (selected)
  - Without instruction: Overall 1.9; Male 1.7; Female 2.7
  - Secondary: Overall 8.9; Male 7.0; Female 17.2
  - Superior: Overall 20.3; Male 10.4; Female 33.3
- Table 1. Unemployment by Duration (as % of unemployment)
  - Less than one year: Overall 35.6; Male 33.8; Female 35.6
  - 12–23 Months: Overall 19.3; Male 18.4; Female 19.3
  - 24 Month and more: Overall 45.1; Male 47.8; Female 45.1
- Table 2. Labor Force Participation rate (selected)
  - 15 and +: Overall 41.7; Male 68.9; Female 14.2
  - 15-24: Overall 28.2; Male 46.5; Female 8.9
  - 25-54: Overall 55.5; Male 91.7; Female 19.9
- Table 3. Employment by Sector (Effective (thousands); Percent)
  - Agriculture: Overall 1,136; 11.7 percent. Male 1,040; 12.6 percent. Female 95; 6.5 percent.
  - Industry: Overall 1,337; 13.7 percent. Male 924; 11.2 percent. Female 413; 28.0 percent.
  - BTP: Overall 1,886; 19.4 percent. Male 1,860; 22.5 percent. Female 25; 1.7 percent.
  - Services: Overall 5,377; 55.2 percent. Male 4,436; 53.7 percent. Female 941; 63.8 percent.
- Table 3. Employment Public vs. Private Sector (Effective (thousands); Percent)
  - Public: Overall 3,346; 34.4 percent. Male 2671; 32.3 percent. Female 95; 45.8 percent.
  - Private: Overall 6,390; 65.6 percent. Male 5,591; 67.7 percent. Female 413; 54.2 percent.
  - Total: Overall 9,735; Male 8,261; Female 25; 100 percent.

### Employment-GDP elasticities: measurement and findings
- Nonhydrocarbon focus: hydrocarbon sector employs less than 5 percent of total employment while representing about 35 percent of total GDP.
- Arc elasticity:
  - Average arc elasticity (ratio of employment growth to nonhydrocarbon GDP growth) over the period: 0.64.
  - Correlation between employment growth and nonhydrocarbon GDP growth: about 0.1.
  - Arc elasticity for youth (age 15–24) over recent 5 years: about one-half of average arc elasticity for total employment and about one-third of arc elasticity for age group 24+.
  - By sector: industry characterized by the highest employment intensity of growth; services absorb the largest part of new entrants.
- Dynamic OLS specification (1993–2010) reported (notation preserved):
  - ݈݊ (ܧ௧) ൌെ2.882൅0.442݈݊ (ܧ௧ିଵ) ൅0.497݈݊ (ܻ௧)
    - (െ2.15) (1.73) (2.19)
  - Associated R2: 0.97.
- Estimated elasticities (Table 4):
  - Contemporaneous: 0.497 (2.19)***
  - 1-year ahead: 0.715 (3.519)***
  - 2-year ahead: 0.811 (5.692)***
  - 3-year ahead: 0.853 (8.544)***
  - 4-year ahead: 0.872 (10.852)***
  - 5-year ahead: 0.880 (11.836)***
  - Long-run: 0.887 (12.008)***
- Interpretation:
  - Short-term (contemporaneous) elasticity: about 0.5.
  - Long-term elasticity (for k → ∞): about 0.9.
  - Recursive estimates indicate the short-run elasticity has significantly declined over the most recent period.

### Determinants of employment-output elasticities (literature summary)
- Identified determinants include:
  - (i) economic openness and export orientation,
  - (ii) product market regulation and competitiveness,
  - (iii) the size of public sector,
  - (iv) the rigidity of the labor market.
- Tentative evidence: lower economic openness, large public sectors and more rigid labor and product markets are associated with lower elasticities and higher unemployment.

### Labor market flexibility indicator and Algeria’s position
- Composite indicator based on Fraser Institute’s Economic Freedom of the World (EFW) database and six policy areas:
  - (i) Minimum wage,
  - (ii) Hiring and Firing regulation,
  - (iii) Centralized collective wage bargaining,
  - (iv) Mandated cost of hiring,
  - (v) Mandated cost of work dismissal,
  - (vi) Conscription.
- Scale: standardized on a 0-10 range (higher value = more flexible).
- Algeria’s score and trend:
  - Algeria scores 5 out of 10 on the composite indicator.
  - Algeria’s labor market is less flexible than in other MENA and emerging countries.
  - Trend: labor market rigidity has increased over the most recent period for which data are available.

### Empirical methodology and main econometric findings
- Data and samples:
  - Panel dataset for 183 countries spanning 1980 to 2008; empirical estimations use a sample of 140 countries spanning 1980–2008.
- Strategy:
  - Static reduced-form specification: unemployment rate regressed on labor market flexibility index, Algeria dummy interaction, country dummies, controls (output gap, government size, trade openness, urbanization, population density, crisis dummy), and time trend.
  - Dynamic reduced-form specification: changes in unemployment regressed on lagged unemployment, labor market flexibility, Algeria interaction, and same controls; two-step GMM-system estimator used with up to 2 lags and Windmeijer standard errors.
- Main static results:
  - Improvements in labor market flexibility have a statistically significant negative effect on unemployment in all specifications.
  - Effect magnitude for Algeria (static): an increase in the composite labor market index of one standard deviation would decrease the unemployment rate by about 1 percentage point.
  - Government size has a positive and statistically significant effect on changes in unemployment in some specifications.
- Main dynamic results:
  - Improvements in labor market flexibility induce declines in unemployment in dynamic specifications.
  - Effect magnitude for Algeria (dynamic): increase in the composite labor market index of one standard deviation decreases unemployment rate by about 0.9–1.2 percentage point.
  - Baseline specification: one standard deviation increase associated with a decrease in the annual change in unemployment of about 1.1 percentage points.
  - Persistence: lag of unemployment is statistically significant and higher than 1/14, implying autocorrelation coefficient between 0 and 1 and that improvements can reduce unemployment over the medium term.
  - Financial crises have a positive and statistically significant effect on changes in unemployment (column VI).
- Robustness:
  - Hansen J-test p-values: 0.25 to 0.56 (cannot reject validity of instruments).
  - Arellano–Bond AR(2) test p-values: 0.47 to 0.54 (cannot reject no 2nd-order serial correlation).
  - Results robust when restricting sample to non-OECD countries and when addressing instrument proliferation using collapsed instruments.

### Unemployment-output elasticities and labor market flexibility
- Two-step approach:
  1. Compute unemployment and youth unemployment elasticities as in equation (1).
  2. Regress estimated elasticities across countries on the composite indicator of labor market flexibility.
- Findings:
  - Overall unemployment reacts more strongly than youth unemployment to changes in GDP.
  - More flexible labor markets translate growth into larger reductions in total and youth unemployment.
  - Because Algerian youth unemployment has been less responsive to economic activity, improvements in labor market flexibility will tend to have a higher effect on youth unemployment.

### Medium-term scenarios (stylized projections)
- Two methodologies used:
  1. ILO (2011) estimates of economically active population with demographic projections and alternative employment-GDP elasticities.
  2. Projections using estimated unemployment-GDP elasticities.
- ILO-based scenarios (Table 7 highlights):
  - Labor Force (millions): 2011 10.997; 2012 11.329; 2013 11.569; 2014 11.802; 2015 12.029; 2016 12.252
  - Baseline: Elasticity = 0.497
    - Average growth 2011–16 = 5%
      - Employed (millions): 2011 9.977; 2012 10.224; 2013 10.478; 2014 10.738; 2015 11.005; 2016 11.278
      - Unemployment rate (%): 2011 9.278; 2012 9.750; 2013 9.432; 2014 9.015; 2015 8.518; 2016 7.947
    - Average growth 2011–16 = 6%
      - Employed (millions): 2011 10.025; 2012 10.324; 2013 10.631; 2014 10.948; 2015 11.274; 2016 11.610
      - Unemployment rate (%): 2011 8.532; 2012 8.574; 2013 7.842; 2014 7.004; 2015 6.080; 2016 5.075
  - Alternative: Elasticity = 0.379
    - Average growth 2011–16 = 5%
      - Employed (millions): 2011 9.920; 2012 10.108; 2013 10.301; 2014 10.496; 2015 10.696; 2016 10.899
      - Unemployment rate (%): 2011 9.793; 2012 10.773; 2013 10.968; 2014 11.066; 2015 11.088; 2016 11.042
    - Average growth 2011–16 = 8%
      - Employed (millions): 2011 10.027; 2012 10.328; 2013 10.638; 2014 10.958; 2015 11.287; 2016 11.625
      - Unemployment rate (%): 2011 8.512; 2012 8.535; 2013 7.783; 2014 6.924; 2015 5.979; 2016 4.952
- Unemployment-GDP elasticity scenarios (Figure 10 highlights):
  - Baseline and non-hydrocarbon GDP growth of about 5 percent:
    - Overall unemployment decreases only slightly over the medium term.
    - Youth unemployment remains mostly stable.
  - Improving potential growth from 5 to 7 percent would not be sufficient to significantly reduce youth unemployment.
  - Alternative scenario (labor market flexibility improves to average of other oil producers and emerging countries):
    - Both total and youth unemployment decrease over the medium term.
    - Numerical example: total unemployment could fall from 10 percent in 2010 to 8.4 percent in 2016; youth unemployment could decrease from 21.5 percent in 2010 to 19 percent in 2016.

### Conclusions and policy implications
- Context and stylized facts:
  - Despite sustained growth, Algeria’s unemployment remains high compared to other emerging economies.
  - Overall unemployment fell over the past ten years, but youth unemployment has been more persistent; the ratio of youth unemployment to overall unemployment has increased.
- Key drivers identified:
  - Low elasticity for youth employment is a main factor behind high youth unemployment.
  - Labor market imperfections reduce the employment intensity of growth.
  - Algeria’s labor market is rigid in absolute and relative terms and favors insider over outsider workers.
  - Mismatches between labor supply and private sector demand: private sector has not created sufficient demand for skilled workers; student distribution favors humanities, social sciences, law and education, generating undersupply of skills needed by the private sector.
- Policy recommendations:
  - Reforms to improve labor market flexibility are likely to reduce unemployment in the short and medium term.
  - Reforms aimed at reducing search and hiring costs are especially important to integrate young outsider workers.
  - Properly designed active labor market policies can improve job matching efficiency and enhance skills of the unemployed.
  - Reforms to address labor-market mismatches (education and training alignment with private sector demand) are required to tackle high unemployment among young graduates.
  - Reforms to remove labor market imperfections will reduce very long unemployment spells by increasing job turnover and reducing long-term unemployment incidence.
  - Improve the business climate and foster product market competition to increase labor demand:
    - Lower barriers to entry curb market power and incumbents’ rents.
    - Reduced rent sharing can decrease wage claims, close the gap between productivity and real wages, and reduce search time for high-wage sectors.

*Italic source: _wp1299 - 1. Unemployment Statistics, 2010 (IMF PDF chapter).*

### 1.  Unemployment Statistics, 2010 ......................................................................................

### _wp1299 - 1.  Unemployment Statistics, 2010 ......................................................................................18

### Introduction
- Purpose: analyze unemployment and labor market developments in Algeria and assess factors that may hamper employment creation, including estimates of employment-GDP elasticities by sector and age group and the effect of labor market flexibility on unemployment.
- Main inference: relatively low employment-GDP elasticities and a relatively rigid labor market explain much of Algeria’s high youth unemployment; improvements in labor market flexibility could significantly reduce unemployment in the short and medium term.
- Structure: descriptive statistics; GDP-employment elasticities; labor market flexibility impact estimates; stylized medium-term scenarios; policy implications.

### Stylized facts on Algeria’s labor market
- Overall unemployment rate:
  - Fell from 30 percent in 2000 to 10 percent in 2010.
- Demographic and participation trends:
  - Fertility rates: declined from 5.8 percent in 1985 to 2.4 percent in 2007.
  - Population growth: declined from 3.1 percent to 1.5 percent over the same period.
  - Labor force growth (additional demand for jobs): average of 4.2 percent over 1991–2000; average of 2 percent over 2001–10.
  - Employment growth: average of 2.9 percent in 1991–2000; average of 4.7 percent in 2001–10.
- Unemployment composition and persistence:
  - Youth unemployment: 21.5 percent.
  - Female unemployment: 19 percent.
  - Unemployment for people with higher level of education: 20 percent.
  - Duration: almost 50 percent of unemployed have been seeking a job for more than two years.
- Labor market rigidities and skill mismatches:
  - Algeria’s labor market tends to favor insider versus outsider workers.
  - Mismatch between supply of graduates (fields such as humanities, social sciences, law and education) and private sector demand for skills.
  - Low job turnover and long-term unemployment reduce effectiveness of active labor market policies.

### Employment-GDP elasticities: measurement and findings
- Concept: elasticity of employment with respect to output (employment intensity of growth).
- Nonhydrocarbon focus: hydrocarbon sector employs less than 5 percent of total employment while representing about 35 percent of total GDP; employment in hydrocarbon sector is usually not very much correlated with changes in production.
- Arc elasticity:
  - Average arc elasticity (ratio of employment growth to nonhydrocarbon GDP growth) over the period: 0.64.
  - Correlation between employment growth and nonhydrocarbon GDP growth: about 0.1.
  - Arc elasticity for youth (age 15–24) over recent 5 years: about one-half of average arc elasticity for total employment and about one-third of arc elasticity for age group 24+.
  - By sector: industry characterized by the highest employment intensity of growth; services absorb the largest part of new entrants.
- Dynamic specification and estimated elasticities:
  - Dynamic time-series specification (equation (1) in source) estimated by OLS over 1993-2010 to reduce volatility of arc elasticities and to identify k-ahead cumulative responses.
  - OLS estimation result reported in source (notation preserved):
    - ݈݊ (ܧ௧) ൌെ2.882൅0.442݈݊ (ܧ௧ିଵ) ൅0.497݈݊ (ܻ௧)
      - (െ2.15) (1.73) (2.19)
    - Associated R2: 0.97.
  - Interpretation:
    - Short-term (contemporaneous) elasticity: about 0.5.
    - Long-term elasticity (for k → ∞): about 0.9.
  - Recursive estimates over periods 1993-2000, 1993-2001, and 1993-2010 indicate the short-run elasticity has significantly declined over the most recent period, implying the employment intensity of growth has decreased and higher growth and/or changes in underlying factors will be needed to continue reducing unemployment.

### Determinants of employment-output elasticities (literature summary)
- Identified determinants include:
  - (i) economic openness and export orientation,
  - (ii) product market regulation and competitiveness,
  - (iii) the size of public sector,
  - (iv) the rigidity of the labor market.
- Tentative evidence: lower economic openness, large public sectors and more rigid labor and product markets are associated with lower elasticities and higher unemployment.

### Labor market flexibility and unemployment: indicator and descriptive evidence
- Labor market flexibility composite indicator:
  - Data source: Fraser Institute’s Economic Freedom of the World (EFW) database.
  - Composite measure based on six policy areas:
    - (i) Minimum wage,
    - (ii) Hiring and Firing regulation,
    - (iii) Centralized collective wage bargaining,
    - (iv) Mandated cost of hiring,
    - (v) Mandated cost of work dismissal,
    - (vi) Conscription.
  - Scale: standardized on a 0-10 range, with higher value representing a more flexible labor market.
- Algeria’s score and trend:
  - Algeria scores 5 out of 10 on the composite indicator (overall rigid in absolute terms).
  - Algeria’s labor market is less flexible than in other MENA and emerging countries.
  - Trend: labor market rigidity has increased over the most recent period for which data are available.

### Empirical methodology and key econometric results
- Data and samples:
  - Panel dataset for 183 countries spanning 1980 to 2008 used to construct indicators.
  - Empirical estimations reported use a sample of 140 countries spanning the period 1980–2008.
- Strategy:
  - Two-part empirical analysis:
    - Static model specification: test hypothesis that quality of labor market regulations has a first-order effect on unemployment levels.
    - Dynamic model specification: test whether labor market flexibility affects the change in unemployment over time.
- Main empirical finding:
  - After controlling for other macroeconomic and demographic variables, increases in the quality of labor market regulations and institutions have a statistically significant negative impact both on the level and on the change of unemployment outcomes (i.e., greater labor market flexibility reduces unemployment in level and in changes).

### Medium-term implications and scenarios (stylized)
- Without reforms improving labor market responsiveness to changes in economic activity, unemployment is likely to remain high over the medium term.
- Declining employment intensity of growth implies that to reduce unemployment further, policy will need to deliver:
  - Continuously larger gains in growth and/or
  - Changes in the factors underpinning employment elasticities (including labor market reforms to increase flexibility and reduce rigidities that favor insiders).

*Italic source: _wp1299 - 1.  Unemployment Statistics, 2010 (IMF PDF chapter).*

### 25.      In order to assess the relationship between labor market flexibility and the level of

### _wp1299 - 25.      In order to assess the relationship between labor market flexibility and the level of

### Empirical specification
- Static reduced-form specification (equation (2)): unemployment rate ܷ
௜௧ is regressed on the composite indicator of labor market flexibility ܮ
௜௧, interaction of flexibility with an Algeria dummy ܦ
௧, country dummies ߙ
௜, a vector of controls ࢄ
௜,௧ and a common time trend.
- Controls include: output gap (proxied by the difference of the GDP growth rate from a 5-year moving average), government size (log of the ratio of government consumption to GDP), trade openness (log of exports+imports to GDP), urbanization rate, population density, a crisis dummy for financial crises (banking, debt and currency), and a common time trend.
- Dynamic reduced-form specification (equation (3)): changes in unemployment ܷ∆
௜௧ regressed on lagged unemployment, labor market flexibility, Algeria interaction, and the same controls.
- Endogeneity and reverse causality in equation (3) addressed using the two-step GMM-system estimator (all explanatory variables treated as endogenous and instrumented using up to 2 lags). Windmeijer standard errors used.

### Main static results
- Improvements in the quality of labor market regulations (higher flexibility) have a statistically significant negative effect on unemployment in all specifications.
- Effect magnitude for Algeria:
  - "an increase in the composite labor market index of one standard deviation would decrease the unemployment rate by about 1 percentage point."
- Robustness:
  - Effect remains extremely robust across specifications.
  - Results remain robust when the sample is restricted to non-OECD countries.

- Control variables:
  - Government size has a positive and statistically significant effect on changes in unemployment (column II).
  - Interpretation: larger government size and larger share of public employment associated with higher unemployment.

### Main dynamic results
- Improvements in labor market flexibility induce declines in unemployment in the dynamic specifications.
- Effect magnitude for Algeria (dynamic):
  - Increase in the composite labor market index of one standard deviation decreases unemployment rate by about 0.9–1.2 percentage point.
  - Baseline specification (first column): one standard deviation increase in the labor market index associated with a decrease in the annual change in unemployment of about 1.1 percentage points.
- Persistence:
  - The lag of unemployment is statistically significant and higher than 1
    14
    , implying autocorrelation coefficient of the level of unemployment is between 0 and 1 and that improvements in labor market flexibility can reduce unemployment over the medium term.
- Control variables:
  - Financial crises have a positive and statistically significant effect on changes in unemployment (column VI).

### Robustness checks and tests
- Two-step GMM consistency:
  - Hansen J-test p-values across specifications range from 0.25 to 0.56 (cannot reject validity of instruments).
  - Arellano–Bond test for no second-order serial correlation p-values range from 0.47 to 0.54 (cannot reject no 2nd-order serial correlation).
- To address instrument proliferation when excluding OECD countries, the GMM-system estimator was applied with a collapsed number of instruments following Roodman (2009b); results remain statistically significant and larger for Algeria than for the sample average.

### Unemployment-output elasticity and labor market flexibility
- Two-step approach:
  1. Compute unemployment and youth unemployment elasticities as in equation (1).
  2. Regress estimated elasticities across countries on the composite indicator of labor market flexibility.
- Findings:
  - Overall unemployment reacts more strongly than youth unemployment to changes in GDP.
  - More flexible labor markets translate growth into larger reductions in total and youth unemployment.
  - Because Algerian youth unemployment has been less responsive to economic activity, improvements in labor market flexibility will tend to have a higher effect on youth unemployment.

### Medium-term scenarios (stylized projections)
- Two methodologies used:
  1. ILO (2011) estimates of economically active population with demographic projections and alternative employment-GDP elasticities.
  2. Projections using estimated unemployment-GDP elasticities.

- ILO-based scenarios (Table 7 highlights):
  - Baseline: assuming employment-GDP elasticity equal to the one in the first column of Table 4, average non-hydrocarbon GDP growth of 5 percent leads to unemployment reduction of about 1.3 percentage points over the medium-term: from about 9.3 percent projected for 2011 to about 8 percent in 2016.
  - More favorable growth: non-hydrocarbon growth of about 6 percent would reduce unemployment to about 5 percent by 2016.
  - If the employment-GDP elasticity continues to decline and the average over 2011–16 is about 0.4 (extending the trend in Figure 4), then:
    - With nonhydrocarbon GDP growth of about 5 percent, the unemployment rate would increase over the medium-term up to 11 percent.
    - To reduce unemployment to 5 percent by 2016 under that low elasticity, the nonhydrocarbon sector would need to grow at about 8 percent annually.

- Unemployment-GDP elasticity scenarios (Figure 10 highlights):
  - Baseline (elasticities as in Figure 5) and non-hydrocarbon GDP growth of about 5 percent:
    - Overall unemployment decreases only slightly over the medium term.
    - Youth unemployment remains mostly stable.
    - Improving potential growth from 5 to 7 percent would not be sufficient to significantly reduce youth unemployment.
  - Alternative scenario (labor market flexibility improves to average of other oil producers and emerging countries):
    - Both total and youth unemployment decrease over the medium term.
    - Numerical example: total unemployment could fall from 10 percent in 2010 to 8.4 percent in 2016; youth unemployment could decrease from 21.5 percent in 2010 to 19 percent in 2016.

### Conclusions and policy implications
- Context and stylized facts:
  - Despite sustained growth, Algeria’s unemployment remains high compared to other emerging economies.
  - Overall unemployment fell over the past ten years, but youth unemployment has been more persistent; the ratio of youth unemployment to overall unemployment has increased.
- Key drivers identified:
  - Low elasticity for youth employment is a main factor behind high youth unemployment.
  - Labor market imperfections reduce the employment intensity of growth.
  - Algeria’s labor market is rigid in absolute and relative terms and favors insider over outsider workers.
  - Mismatches between labor supply and private sector demand: private sector has not created sufficient demand for skilled workers; student distribution favors humanities, social sciences, law and education, generating undersupply of skills needed by the private sector.
- Policy recommendations:
  - Reforms to improve labor market flexibility are likely to reduce unemployment in the short and medium term.
  - Reforms aimed at reducing search and hiring costs are especially important to integrate young outsider workers.
  - Properly designed active labor market policies can improve job matching efficiency and enhance skills of the unemployed.
  - Reforms to address labor-market mismatches (education and training alignment with private sector demand) are required to tackle high unemployment among young graduates.
  - Reforms to remove labor market imperfections will reduce very long unemployment spells by increasing job turnover and reducing long-term unemployment incidence.
  - Improve the business climate and foster product market competition to increase labor demand:
    - Lower barriers to entry curb market power and incumbents’ rents.
    - Reduced rent sharing can decrease wage claims, close the gap between productivity and real wages, and reduce search time for high-wage sectors.

*Italic: Source — Excerpted content from the supplied IMF PDF chapter on labor market flexibility and unemployment in Algeria.*

### REFERENCES

### _wp1299 - REFERENCES

### References (selected entries)
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- Bassanini, A., and R. Duval, 2006, “Employment Patterns in OECD Countries: Reassessing the Role of Policies and Institutions,” OECD Economics Department Working Papers, No. 486, OECD Publishing.
- Bassanini, A., and R. Duval, 2009, “Unemployment, Institutions, and Reform Complementarities: Reassessing the Aggregate Evidence for OECD Countries,” Oxford Review of Economic Policy, Vol. 25, No. 1, pp.40–59.
- Belot, Michèle, and Jan C van Ours, 2004, “Does the Recent Success of Some OECD Countries in Lowering their Unemployment Rates Lie in the Clever Design of their Labor Market Reforms?” Oxford Economic Papers, 56 (4), pp. 621–42.
- Bernal-Verdugo, L., D. Furceri, and D. Guillaume, 2012a, “Crises, Labor Market Policy, and Unemployment,” IMF Working Papers 65.
- Bernal-Verdugo, L., D. Furceri, and D. Guillaume, 2012b, “Labor Market Flexibility and Unemployment: New Empirical Evidence of Static and Dynamics Effects,” IMF Working Papers 64.
- Botero, Juan C., et al., 2004, “The Regulation of Labor.” Quarterly Journal of Economics, Vol. 119 (4), 1339–82.
- Bruno, S.F., et al., 2001, “Measuring the Effect of Globalization on Labor Demand Elasticity: an empirical application to OECD countries.” FLOWENLA Discussion Paper 2.
- Daveri, F., and G. Tabellini, 2000, “Unemployment, Growth and Taxation in Industrial Countries,” Economic Policy.
- Döpke, J., 2001, “The Employment Intensity of Growth in Europe,” Kiel Working Paper No. 1021, Kiel Institute of World Economics.
- Elmeskov, Jørgen, Martin, John P., and Scarpetta, Stefano, 1998, “Key Lessons for Labour Market Reforms: Evidence from OECD Countries’ Experiences,” Swedish Economic Policy Review, Vol. 5 (2), pp. 205–52.
- Feldmann, Horst, 2006, “Government Size and Unemployment: Evidence from Industrial Countries,” Public Choice, Vol. 127 (3–4), pp. 451–67.
- Feldmann, Horst, 2009, “The Unemployment Effects of Labor Regulation Around the World,” Journal of Comparative Economics Vol. 37, 1: 76–90.
- Howell, David, and Miriam Rehm, 2009, “Unemployment Compensation and High European Unemployment: a Reassessment with New Benefit Indicators,” Oxford Review of Economic Policy, Vol. 25, No. 1, pp.60–93.
- Kapsos, S., 2005, “The Employment Intensity of Growth: Trends and Macroeconomic Determinants,” ILO Employment Strategy Papers No. 12.
- ILO, 2011, ILO Estimates and Projections of the Economically Active Population: 1990–2020.
- Mourre, G., 2004, “Did the Pattern of Aggregate Employment Growth Change in the Euro Area in the late 1990s?” European Central Bank Working Paper Series No. 358.
- Nickell, S., 1997, “Unemployment and Labor Market Rigidities: Europe Versus North America,” The Journal of Economic Perspectives, Vol. 11, No. 3.
- Nickell, S., 1998, “Unemployment: Questions and Some Answers,” The Economic Journal, Vol. 108, Issue 448 (May).
- Nunziata, L., 2002, "Unemployment, Labour Market Institutions and Shocks,” Nuffield College Working Papers in Economics, 2002–W16.
- Roodman, D., 2009a, “How to Do xtabond2: An Introduction to Difference and System GMM in Stata,” Stata Journal, Vol. 9(1), pp. 86–136.
- Roodman, D., 2009b, “A Note on the Theme of Too Many Instruments,” Oxford Bulletin of Economics and Statistics, Vol. 71 (1), pp. 135–58.
- Stock, J.H., 1987, “Asymptotic Properties of Least Squares Estimators of Cointegrating Vectors.” Econometrica (55), 277–302.

### Key statistics (Tables 1–3, 2010)
- Table 1. Unemployment Statistics, 2010
  - Unemployment Rate by Age Group and Gender
    - Overall: Overall 10.0; Male 8.1; Female 19.1
    - Young (16-24): Overall 21.5; Male 18.6; Female 37.4
    - Adults (25 and +): Overall 7.1; Male 5.4; Female 15.0
  - Unemployment Rate by Degree of Instruction and Gender
    - Without instruction: Overall 1.9; Male 1.7; Female 2.7
    - Primary: Overall 7.6; Male 7.5; Female 8.0
    - Medium: Overall 10.7; Male 10.5; Female 12.8
    - Secondary: Overall 8.9; Male 7.0; Female 17.2
    - Superior: Overall 20.3; Male 10.4; Female 33.3
  - Unemployment Rate by Areas (Rural vs. Urban) and Gender
    - Rural: Overall 8.7; Male 7.2; Female 20.1
    - Urban: Overall 10.6; Male 8.6; Female 18.8
    - Total: Overall 10.0; Male 8.1; Female 19.1
  - Unemployment Rate by Duration (as % of unemployment) and Gender
    - Less than one year: Overall 35.6; Male 33.8; Female 35.6
    - 12–23 Months: Overall 19.3; Male 18.4; Female 19.3
    - 24 Month and more: Overall 45.1; Male 47.8; Female 45.1
    - Total: Overall 100; Male 100; Female 100
  - Unemployment Rate for Graduates
    - Humanities: Overall 27.3; Male 14.7; Female 34.4
    - Social Sciences: Overall 28.7; Male 14.0; Female 43.7
    - Sciences: Overall 18.1; Male 9.8; Female 28.6
    - Enginery: Overall 14.8; Male 9.4; Female 39.7
    - Total: Overall 21.4; Male 11.1; Female 21.4
  - Source: ONS.
- Table 2. Labor Force Statistics, 2010
  - Labor force participation rate
    - 15 and +: Overall 41.7; Male 68.9; Female 14.2
    - 15-24: Overall 28.2; Male 46.5; Female 8.9
    - 25-54: Overall 55.5; Male 91.7; Female 19.9
    - 25-34: Overall 57.5; Male 90.8; Female 23.9
    - 35-54: Overall 53.9; Male 92.4; Female 16.8
    - 15-60: Overall 45.9; Male 75.0; Female 15.7
    - 60 and +: Overall 9.7; Male 17.5; Female 2.0
  - Source: ONS.
- Table 3. Employment Statistics, 2010
  - Employment by Sector and Gender (Effective (thousands); Percent)
    - Agriculture: Overall 1,136; 11.7 percent. Male 1,040; 12.6 percent. Female 95; 6.5 percent.
    - Industry: Overall 1,337; 13.7 percent. Male 924; 11.2 percent. Female 413; 28.0 percent.
    - BTP: Overall 1,886; 19.4 percent. Male 1,860; 22.5 percent. Female 25; 1.7 percent.
    - Services: Overall 5,377; 55.2 percent. Male 4,436; 53.7 percent. Female 941; 63.8 percent.
  - Employment Public vs. Private Sector and Gender (Effective (thousands); Percent)
    - Public: Overall 3,346; 34.4 percent. Male 2671; 32.3 percent. Female 95; 45.8 percent.
    - Private: Overall 6,390; 65.6 percent. Male 5,591; 67.7 percent. Female 413; 54.2 percent.
    - Total: Overall 9,735; 100 percent. Male 8,261; 100 percent. Female 25; 100 percent.
  - Source: ONS.

### Regression results and elasticities (Tables 4–6)
- Table 4. Employment-GDP Elasticities (note: t-statistics in parenthesis; *** denotes significance at 1 percent)
  - Contemporaneous: 0.497 (2.19)***
  - 1-year ahead: 0.715 (3.519)***
  - 2-year ahead: 0.811 (5.692)***
  - 3-year ahead: 0.853 (8.544)***
  - 4-year ahead: 0.872 (10.852)***
  - 5-year ahead: 0.880 (11.836)***
  - Long-run: 0.887 (12.008)***
- Table 5. Unemployment and Labor Market Flexibility – Static Regression (OLS)
  - L t: coefficients across specifications include -0.567 (-2.97)***; -0.547 (-2.86)***; -0.469 (-2.33)**; -0.529 (-2.72)***; -0.566 (-2.84)***; -0.572 (-3.03)***; -0.361 (-1.61)*; -0.210 (-0.88)
  - L t * D t: coefficients across specifications include -5.947 (-31.10)***; -5.193 (-11.04)***; -6.004 (-31.94)***; -5.974 (-30.94)***; -5.947 (-29.70)***; -5.941 (-31.39)***; -6.153 (-27.26)***; -5.9712 (-10.33)***
  - Output gap t: coefficients include -0.041 (-1.77)*; -0.013 (-0.59); -0.038 (-1.60); -0.043 (-1.80)*; -0.042 (-1.79)*; -0.044 (-1.88)*; -0.038 (-1.59); -0.013 (-0.59)
  - Government size t: 2.736 (1.78)* in one specification; 2.326 (1.47) in another
  - Openness t: -0.865 (-0.75) in one specification; 1.614 (0.94) in another
  - Population density t: 9.598 (2.02)** in one specification
  - Crisis t: 0.630 (1.16) in one specification; 0.780 (1.36) in another
  - Time trend t: -0.053 (-1.42) in one specification; -0.186 (-2.18)** in another
  - N: 882–893 across specifications
  - R^2: 0.84–0.85 across specifications
  - Note: t-statistics in parenthesis based on robust clustered standard errors. *,**,*** denote significance at 10 percent, 5 percent, 1 percent respectively. Country fixed effects included.
- Table 6. Unemployment and Labor Market Flexibility – Dynamic Regression (GMM)
  - L t: coefficients across specifications include -0.316 (-3.23)***; -0.293 (-3.30)***; -0.301 (-2.96)***; -0.232 (-2.52)**; -0.277 (-3.17)***; -0.287 (-3.06)***; -0.137 (-1.54)
  - L t * D t: coefficients include -6.332 (-2.38)**; -6.235 (-2.57)***; -6.449 (-2.63)***; -6.882 (-2.98)***; -6.781 (-2.61)***; -6.250 (-2.88)***; -5.131 (-2.24)**
  - Unemployment t-1: coefficients include -0.043 (-1.56); -0.057 (-2.10)**; -0.084 (-1.95)**; -0.058 (-2.16)**; -0.058 (-2.03)**; -0.063 (-2.13)**; -0.046 (-1.64)*
  - Output gap t: coefficients generally small and statistically insignificant across specifications (examples: 0.013 (0.41); 0.017 (0.51); 0.009 (0.29))
  - Government size t: 0.787 (1.45) in one specification
  - Openness t: -0.682 (-1.43) in one specification
  - Urban population t: -3.054 (-0.76) in one specification
  - Population density t: 0.062 (0.49) in one specification
  - Crisis t: 0.725 (2.10)** in one specification
  - Time trend t: -0.055 (-2.18)** in one specification
  - N: 879–890 across specifications
  - Arellano-Bond, AR(2) test, p-value: 0.470–0.551 across specifications
  - Hansen test, p-value: 0.245–0.563 across specifications
  - Note: z-statistics in parenthesis. ***,**, * denote significance at 1%, 5%, and 10%, respectively. GMM-System Estimator: Two-step using Windmeijer standard errors, all regressors considered as endogenous (instrumented using up to 2 lags).

### Medium-term scenario projections (Table 7, 2011–16)
- Labor Force (millions)
  - 2011: 10.997
  - 2012: 11.329
  - 2013: 11.569
  - 2014: 11.802
  - 2015: 12.029
  - 2016: 12.252
- Baseline: Elasticity = 0.497
  - Average growth 2011–16 = 5%
    - Employed (millions): 2011 9.977; 2012 10.224; 2013 10.478; 2014 10.738; 2015 11.005; 2016 11.278
    - Unemployment rate (%): 2011 9.278; 2012 9.750; 2013 9.432; 2014 9.015; 2015 8.518; 2016 7.947
  - Average growth 2011–16 = 6%
    - Employed (millions): 2011 10.025; 2012 10.324; 2013 10.631; 2014 10.948; 2015 11.274; 2016 11.610
    - Unemployment rate (%): 2011 8.532; 2012 8.574; 2013 7.842; 2014 7.004; 2015 6.080; 2016 5.075
- Alternative: Elasticity = 0.379
  - Average growth 2011–16 = 5%
    - Employed (millions): 2011 9.920; 2012 10.108; 2013 10.301; 2014 10.496; 2015 10.696; 2016 10.899
    - Unemployment rate (%): 2011 9.793; 2012 10.773; 2013 10.968; 2014 11.066; 2015 11.088; 2016 11.042
  - Average growth 2011–16 = 8%
    - Employed (millions): 2011 10.027; 2012 10.328; 2013 10.638; 2014 10.958; 2015 11.287; 2016 11.625
    - Unemployment rate (%): 2011 8.512; 2012 8.535; 2013 7.783; 2014 6.924; 2015 5.979; 2016 4.952
- Source: ONS, ILO and Author’s calculations.

### Figures (listed elements and captions)
- Figure 1. Demographic Indicators
  - Population Growth (%) and Fertility Rate (Births per married woman) time series (years shown include 1985, 1995, 2000, 2005, 2008).
- Figure 2. Evolution of Unemployment over Time
  - Panel A and Panel B: series for Unemployment and Youth unemployment (years 2000–2010).
- Figure 3. Employment and GDP over Time (source: ONS, WDI, Author calculation).
- Figure 4. Arc Elasticities by Age Groups (Arc 15–24 (Average = 0.3); Arc 24+ (Average = 0.86)).
- Figure 5. Arc Elasticities by Sectors (Agriculture average = -2.2; Industry average = 3.7; Services average = 1.3).
- Figure 6. Recursive Estimates of Elasticities (estimate with lower limit and upper limit series).
- Figure 7. Labor Market Flexibility in Algeria, 2008 (regional comparison: CEEDynamic Asia MENA Latin America Oil Producers Algeria with values 0–7 on scale).
- Figure 8. Evolution of Labor Market Flexibility over Time.
- Figure 9. Elasticity Unemployment-Output
  - Panel A. Total Unemployment: Elasticity unemployment-output scale -2 to 4 and labor market flexibility scale 46810.
  - Panel B. Youth Unemployment.
- Figure 10. Labor Market Flexibility and Medium-term Unemployment
  - Panel A. Total Unemployment
  - Panel B. Youth Unemployment
  - Country list shown (ALB, DZA, ARG, ARM, AUS, AUT, AZE, BEL, BLZ, BIH, BGR, CAN, CHL, CHN, COL, CRI, HRV, CYP, CZE, DOM, ECU, EGY, SLV, EST, FJI, FIN, MKD, FRA, GEO, DEU, GRC, HND, HKG, IRL, IRN, ISR, ITA, JAM, JPN, JOR, KAZ, KOR, KGZ, LVA, LTU, LUX, MYS, MLT, MUS, MEX, MDA, MNG, MNE, MAR, NLD, NZL, NIC, NGA, NOR, PAK, PAN, PER, PHL, POL, PRT, ROU, RUS, SGP, SVK, SVN, ZAF, ESP, LKA, SYR, TWN, THA, BHS, TTO, TUN, TUR, UKR, GBR, USA, URY, VNM)
  - Time series panel: Unemployment (baseline: 5 percent growth); Unemployment (reform & 5 percent growth); Unemployment (7 percent growth); Youth Unemployment (baseline: 5 percent growth); Youth Unemployment (reform & 5 percent growth); Youth Unemployment (7 percent growth) for 2010–2016.

*Source: _wp1299 - REFERENCES*

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_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2012/_wp1299.pdf_