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The Costs of Youth Exclusion in the Middle East

28 May 2008, Jad Chaaban

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While the Middle East is experiencing its best economic performance in three decades, the region also finds itself endowed with an unprecedented “youth bulge.” With the highest proportion of youth to adults in the region’s history, the “youth bulge” offers a vast pool of human capital that must be tapped in order to sustain economic growth.

However, many youth are currently excluded from playing productive roles in the region’s economic markets and face difficulties finding meaningful employment and affordable housing, accessing formal credit, and marrying and forming a family. This results in a debilitating state of dependency for the most potentially productive segment of the population. As a result, the region sacrifices billions of dollars to lost wages and weakened productivity.

In “The Costs of Youth Exclusion in the Middle East,” Jad Chaaban, Assistant Professor of Economics at the American University of Beirut, quantifies the economic costs incurred by Middle Eastern countries specifically due to youth unemployment and joblessness, school dropouts, adolescent pregnancy and youth migration. The analysis contains country-specific estimates and pioneers a new methodology to obtain region-wide estimates of the costs of youth exclusion.

Middle Eastern countries are among the furthest away from the "best practice frontier" in reducing youth exclusion, and recent years have seen deteriorating performance in the region. Estimates of the aggregate economic costs of youth exclusion are as high as US$53 billion in Egypt (17% of GDP) and US$1.5 billion in Jordan (7% of GDP). As emphasized in the study, these numerical costs do not capture the wide-ranging social or psychological costs of exclusion. Indeed, the true costs of youth exclusion in the region may be much higher.

Chaaban finds that sheer resource endowments do not impact a country’s ability to respond to these economic constraints on young people. Instead, achieving youth inclusion largely depends on the efficiency with which countries use their available resources. Through improving the effectiveness of interventions, most countries in the Middle East could reduce youth economic exclusion by 20% to 80% without changing public spending levels.