School to work transitions and the impact of public expenditure on education

In this paper we analyse how the decentralization process of the Spanish educational system has affected the school-to-work transition of youths over the last years. Using individual data from the Spanish Labor Force Survey for the period 1993-2002, we estimate a simultaneous equation model for the unemployment and employment hazard rates of these workers. We include public expenditure on education, at the regional level, as an explanatory factor in both hazards. Furthermore we account for cross-regional differences regarding the decision-making authority over education. Our results reveal that for both, university and non-university levels, public expenditure on education significantly improves the chances of Spanish youths in finding the first job after completing the educational system. Furthermore, it seems that the decentralization of university education has positive effects on youths’ labor market prospects in terms of exiting from unemployment. However, we find that such decentralization has no effects over the likelihood of loosing the first job. Finally, we find that public expenditure on non-university education reduces the individual likelihood of leaving the first job especially in those regions without competences in education.