Predictors of Economic Outcomes among Romanian Youth: The Influence of Education - An Empirical Approach Based on Elastic Net Regression

Abstract

Young people have to be provided with opportunities to access prosperous, resilient and fulfilling lives. Investing in education and skills is considered one of the most important ways to support young people's well-being and to enable them to enjoy good career prospects. Using the framework of human capital theory, we explored the role of education among the factors explaining wage variation among Romanian youth. We built our analysis on micro-data for Romania from the EU Statistics on Income and Living Conditions 2020. In order to identify the most important factors influencing the wage distribution, we employed the elastic net regression approach. Moreover, we considered the phenomenon of expansion of education and ran the analysis by alternately using a traditional measure for education and a relative measure reflecting the theory of education as positional good. We ran the analysis for different cohorts of the population, focusing the discussion on the results for young people. Our findings confirm the importance of education for wage distribution together with other factors of influence, such as gender, degree of urbanization, region, sector of employment and working experience. Our conclusions are relevant for designing more effective educational and social policies to deal with various disadvantages faced by youth in Romania.