Duration dependence and routes out of joblessness for young people

This paper examines young people’s exits from joblessness using recent survey datafor Northern Ireland. A reduced form search model is estimated, allowing for a fullyflexible specification of the baseline hazard function, with young people exitingjoblessness into either employment or education and training. There is evidence ofnegative duration dependence in the conditional probability of exiting joblessness.The relationship is not monotonic, however, there being a small ‘spike’ in the hazardrate around 5-6 months consistent with an effect of the introduction of the New Dealfor Young People in 1998.The paper argues that, given negative duration dependence, policy makers would dobetter to increase targeted interventions on those facing the toughest barriers toemployment in the first month of joblessness, where possible, rather than wait for sixmonths as is the current case with New Deal. The main barriers to exit fromjoblessness observable in the data include caring for a young child, having a familybackground of unemployment and low levels of job search. Having poorqualifications also acts as a barrier to exit from joblessness, particularly intoeducation. The introduction of Job Seekers Allowance in 1996 is correlated withshorter jobless spells. Further research is suggested to examine these issues in moredetail, and in particular to examine in greater depth the effects of the introduction ofthe New Deal on duration dependence in joblessness among young people.