An economic analysis of education externalities in the matching process of UK regions (1992-99)
This paper studies the existence and the scale of education externalities in the unemployment durations suffered by workers in the UK. First, we develop a theoretical model. Using a matching framework we show that a rise in the average level of education of a labour market will affect unemployment durations in two different ways. It will increase the firms' expected profits per vacancy opened, since firms expect to be matched with a more qualified worker, rising job creation and reducing unemployment durations. We call this the Composition or External effect. But, since more qualified workers are more efficient in the process of job search, it will also rise the competition amongst workers for opened vacancies, increasing unemployment durations. We name this the Competition effect. In the most skilled segments of the labour market the composition effect will dominate the competition effect, while in the least skilled segments the opposite will be true. Then, we test these theoretical results empirically using data from the UK Labour Force Survey for the 17 UK regions over the period 1992Q1-99Q4. We find that a 1% rise in the average level of education reduces unemployment durations of individuals from skilled occupations by 2.9% on average, while it rises the unemployment durations of individuals from unskilled occupations by 1.9% on average. This effect is robust to different measures of education, to controlling for unobserved heterogeneity and to different parameterisations of the hazard function.
When requesting a correction, please mention this item's handle: RePEc:bde:wpaper:0403. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mar�a Beiro. Electronic Dissemination of Information Unit. Research Department. Banco de Espa�a)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.