The effects of state dependence on university

This paper examines the causal relationship that exists between an individual's unemployment experience and his or her future employment prospects. In literature, such relationship is termed “state dependence”. The data of the present study comes from a survey addressed to a representative sample of Moroccan graduates from three universities covering all their faculties and schools. A dynamic random-effects probit model is applied to the data to test for state dependence effects for Active Moroccan University Graduates. In this model, an individual’s unemployment probability at a given point in time, during a period of three years after graduation, is primarily dependent on his or her professional status in the previous time point and personal characteristics. After controlling both for observed and unobserved population heterogeneity, results strongly suggest that past unemployment increases individuals’ chances of current unemployment, validating the “scar theory” of unemployment, which stipulates that a previous unemployment spell precludes the accumulation of work experience and may bring the deterioration of human capital.