Transitions to adulthood: Education choices, job search and labour market outcomes

Imperfect information about the costs and benefi ts of education or about job opportunities may imply that youth will not always make the right investments in education or be matched with the right jobs. This thesis investigates two research questions centered on the transition to adulthood: how to inform youth about the returns to education and what are the wage eff ects of using social networks to find jobs. These questions are considered in the context of South Africa, using data from the Cape Area Panel Study (CAPS), a longitudinal study of youth. Regarding the first question, existing research on the impact of information interventions has largely ignored the importance of the sequential nature of education investment and heterogeneity in the returns to education, two factors that may affect the impact of information interventions. This thesis addresses this gap in the literature by using a sequential decision making model of investment in education, to investigate the importance of the (in)accuracy of expectations of the return to grade 12 in South Africa. This model allows us to consider how agents may update their expectations in response to new information, when making sequential investment decisions. We fi nd that even if agents respond rationally and are provided with correct information, the accuracy of their expectations may be reduced possibly leading to sub-optimal educational choices. Although it is well known that social networks are productive, in the sense that they increase the probability of finding a job, much less is known about the quality of the match between job seeker and employee that is promoted through their use and, in particular, the impacts on wages, resulting from their use. This thesis estimates the impact of social networks on wages for youth in South Africa. It concludes that the use of social networks is associated with wage discounts and that decreasing social distance (the use of relatives rather than friends), is associated with greater wage penalties. These conclusions have important policy implications. Firstly, we conclude that information interventions should not be conducted without ex ante consideration of the issues of heterogeneity, sequential investment and the process of updating of expectations. Such analysis is likely to be less costly than conducting old experiments and provides the benefit t of anticipating negative impacts before they occur. Secondly, the negative impact on wages of the use of social networks to find jobs suggests that in the context of South Africa, there may be a role for interventions that assist youth to find employment

The Marginal Benefit of an Active Labour Market Program beyond a Public Works Program: Evidence from Papua New Guinea

Policymakers typically try to address youth unemployment in developing countries through either active labor market programs (ALMPs) or labor-intensive public works programs (LIPWs). We examine whether there is any additional benefit for unemployed youth from participating in a comprehensive ALMP compared to a LIPW. We exploit an unanticipated intervention in the largest employment program in Papua New Guinea, which resulted in one intake of the program completing a LIPW and missing out on a comprehensive ALMP. We conduct a difference-in-difference analysis between participants in the intake that missed out on the ALMP component of the program and participants in the intakes immediately before and after. In contrast to most impact evaluations of ALMPs, we show youth that completed the comprehensive ALMP were around twice as likely to be employed in the formal sector 9–12 months after the program compared to similar youth in the intake that only completed a LIWP. This effect was entirely driven by 20% of youth who participated in the ALMP staying with the employer they were placed with following the end of the program. Surveys of these employers illustrate that they use the ALMP as a low-cost, low-risk, and relatively low-effort way of hiring new employees

Can public works programs reduce youth crime? Evidence from Papua New Guinea’s Urban Youth Employment Project

Abstract Crime rates in Papua New Guinea’s capital city of Port Moresby are among the highest in the world. Few youth work, and good jobs are scarce. In 2013, the National Capital District Commission partnered with the World Bank to implement the Urban Youth Employment Project. The project offers out-of-school and out-of-work youth 2 months of public works employment or, for academically qualified candidates, 6 months of classroom and on-the-job training. This paper presents difference-in-differences estimates of project impacts on participants’ social and criminal behavior, 12 to 18 months after completion. The control group consists of observably similar youth living in areas not served by the program. Project participants became less likely to hang out with friends at night, have a best friend involved in crime, and have friends involved in fights or robberies. The program also increased subsequent employment rates and significantly reduced aggressive behavior and gratuitous property damage. However, there is little robust evidence that the program reduced participants’ engagement in or exposure to crime. The study concludes that the program had strong and healthy effects on participants’ peer group and behavior, but more limited effects on the socio-economic causes of crime