Labor-Market Scars When Youth Unemployment is Extremely High: Evidence from Macedonia

46 Pages Posted: 14 Nov 2016

See all articles by Marjan Petreski

Marjan Petreski

University of American college - Skopje - School of Business Economics and Management

Nikica Mojsoska-Blazevski

University of American College, Skopje - School of Business Economics and Management

Marcelo Bergolo

Universidad de la Republica - Instituto de Economía; IZA Institute of Labor Economics

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Abstract

The objective of this study is to assess how the duration of the unemployment spell of Macedonia youth affects later employment (the employment 'scarring' effect) and wage outcomes (the wage 'scarring' effect). To that end, we first devise a model in which the unemployment spell is determined by individual and household characteristics and work attitudes and preferences. Discrete-time duration method is used to estimate this model. Then, we rely on a standard employment and Mincer earnings functions.We repeatedly impute missing wages to address the selection on observables, and use the regional unemployment rate when individual finished school as an instrument to mitigate the selection on unobservables. The School to Work Transition Survey 2012 is used. Results robustly suggest a presence of employment scar as those young persons who stay unemployed over a longer period of time were found to have lower chances to find a job afterwards. On the other hand, the study does not provide evidence for the existence of the wage scar.

Keywords: employment scarring, wage scarring, extremely high unemployment, Macedonia

JEL Classification: E24, J24, J64

Suggested Citation

Petreski, Marjan and Mojsoska-Blazevski, Nikica and Bergolo, Marcelo, Labor-Market Scars When Youth Unemployment is Extremely High: Evidence from Macedonia. IZA Discussion Paper No. 10342, Available at SSRN: https://ssrn.com/abstract=2868288

Marjan Petreski (Contact Author)

University of American college - Skopje - School of Business Economics and Management ( email )

Skopje, 1000
Macedonia

Nikica Mojsoska-Blazevski

University of American College, Skopje - School of Business Economics and Management ( email )

Treta Makedonska Brigada, bb
Skopje, 1000
Macedonia

Marcelo Bergolo

Universidad de la Republica - Instituto de Economía ( email )

Montevideo
Uruguay

HOME PAGE: http://www.iecon.ccee.edu.uy

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

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