The Scarring Effects of Youth Joblessness in Sri Lanka

Retrospective data on labor market spells for successive cohorts of school leavers in Sri Lanka are used to examine whether early spells of joblessness lead to subsequent difficulty in finding or keeping a job. A matching method based on the Joffee and Rosenbaum (1999) balancing score approach is used to generate pairs of school leavers that have similar expected levels of joblessness but that differ in realized levels of joblessness. Assuming that youth are not able to perfectly control whether they are employed or not employed, we argue that marginal differences in joblessness between otherwise observationally equivalent youth can be viewed similarly to a regression discontinuity in experienced joblessness. We find evidence of scarring in that spending the first year after leaving school without a job or training increases subsequent time spent jobless by between 11 to 16%