INFLUENCES OF PAST HISTORY ON THE INCIDENCE OF YOUTH UNEMPLOYMENT: EMPIRICAL FINDINGS FOR THE U.K.

The issue of whether or not there is evidence of a causal relationship between the experience of unemployment and the future economic activity of an individual is, as yet, unresolved by labour economists. Theoretical reasoning suggests that one may expect to find such a relationship, either through a reduction in human capital or through employer 'labelling' or 'screening' processes. This paper considers the issues which lend complexity to the problem and seeks to address these issues using a variety of techniques. In particular, problems arising from interval and point sampling of longitudinal information, the effects of observed and unobserved heterogeneity and from the lack of control for serially correlated exogenous factors are investigated. The study focuses upon the work histories of a group of young males who left school in 1974 at the age of 16 years in the U.K. We find that, having controlled for observed and unobserved heterogeneity, the odds of becoming unemployed are 2.3 times higher for youths who were unemployed last year than for youths who were not unemployed; but, given the current status, the past unemployment history of the individual is not informative about his future chances of being unemployed