Navigating the Nexus: Econometric Insights Into Education and Employment in the Western Balkans

Abstract

In the rapidly changing global economic environment, economic restructuring, innovation, and globalization have led to marked changes in labor markets, creating significant skill gaps and mismatches. The recent economic upheaval, deepened by the COVID-19 pandemic and geopolitical conflicts such as the Russia-Ukraine standoff, has accentuated the need for a new paradigm of growth, one relying more heavily on domestic resources. The Western Balkan region, blessed with abundant natural resources and a prolific agricultural sector, still counts human capital as its most valuable asset. In this context, the evolution of education and the improvement of workforce skills become key components for enhancing economic recovery and growth in the Western Balkan economies. This research paper offers a comprehensive econometric investigation of the dynamics between education, skills, and employment within Western Balkan countries. Utilizing an extensive dataset of 2905 observations from the Balkan Barometer, Regional Cooperation Council (RCC) database, the study delves into the complex roles of compulsory, tertiary, and adult education systems in enhancing employability across six Western Balkan nations -Bosnia and Herzegovina, Kosovo, North Macedonia, Montenegro, and Serbia. The research employs a robust ordinary least squares (OLS) model to examine the effect of varying education levels and skills on employment while factoring in additional socio-demographic variables such as age, gender, and geographical location. The study challenges the conventional wisdom that suggests educational attainment alone is sufficient in the current job market.