Entry of young economists into working life: analysis of the determinants of first unemployment duration

Abstract

This article studies the determinants of the unemployment duration for a cohort of young graduates: those who obtained their university degree in Business, Economics, Management and Marketing in the academic year 2001/2002 at the University of Seville, Spain. After estimating an ordered logit model for duration data, we conclude that graduates' final marks effect a positive impact on their labour insertion. Working while studying and the educational level of the mothers of the graduates also decrease the duration of this first unemployment. No significant effect is found for gender or type of degree dummies.

Acknowledgements

We are very grateful to the Centro de Estudios Andaluces for the research grant (ECOD2.05/038) and, especially, the supervision of our research by José-Ignacio García. We would also like to acknowledge the considerable help by the research assistant Margarita Mariscal and the useful comments on this version given by Ángeles Caraballo and Carlos Usabiaga. Any remaining errors are only ours.

Notes

¹ The questionnaire (in Spanish) is available on request.

² The estimates are obtained by using maximum likelihood. At the end of the estimation, estimates of the hazard rates can be computed by using the predicted cell probabilities for the ordered logit model at the means of the explanatory variables.

³ Estimation of the hazard function can also be carried out following parametric methods of survival. However, these models present two main problems: (i) unobserved heterogeneity, essentially the result of an incomplete specification; and (ii) the form adopted by the hazard function (exponential, Weibull, log-normal, etc.). To avoid these problems, especially the second one, Cox's (1972) model of proportional hazards is very popular in survival studies. In practice, however, we must test if the assumption of proportional hazards is satisfied by our data. Also, as we have noncensored data – all graduates had completed their first period of unemployment – so a discrete model of duration of unemployment is preferable.

⁴ In order to avoid the multicollinearity problem, only the educational level of the mother has been included in the analysis.

⁵ As we work with a homogenous sample of graduates who finish their studies simultaneously and operate in a local labour market, we do not include context variables, such as, the rate of youth unemployment.

⁶ Similar results are reported by Biggeri et al. (2001).

⁷ Good grades (or marks) can be seen as a positive signal of productivity or effort by the employers, if they associate educational success with success in the workplace. Employers can be expected to recruit those applicants they consider to be both most productive and least costly for the kind of work required by the job.

⁸ We also include Business graduates in this market, in spite of being a short-cycle degree. Lassibille et al. (2001) and Fernandez (2006) even find evidence that short-cycle degrees are more labour oriented and young people attending them find a job more quickly. In our sample, being a short-cycle graduate improves labour insertion, although not statistically significantly – as shown in Table 1, most of 23% of these graduates found employment in less than a month. As a consequence, we may conclude the need to increase the labour orientation of the long-cycle degrees included in our sample.