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Labour Supply in a High Unemployment Economy: The Determinants of Engaging in Job Searching

Labour Supply in a High Unemployment Economy: The Determinants of Engaging in Job SearchingA further analysis to establish whether Nd and ILO-U are also behaviourally a homogenous group is to examine differences in their transition probabilities from one labour market state to another over succeeding time periods. Due to the lack of data (our data is cross-sectional and the respondents are not asked regarding their previous labour market experience), we cannot investigate this research question. Note that unlike Nd, ILO-U are engaged in job search and therefore show a stronger attachment to the labour market. Given our findings above that Nd in Kosova are in many respects similar to ILO-U, then with our cross sectional data we investigate what determines an individual’s decision to engage in job search. This provides an indication as to the behavioural similarities between these two groups of individuals. The model that we estimate is a probit model where the dependent variable equals 1 if the person is ILO-U and 0 if Nd. The sample consists of ILO-U (1,309 observations) and Nd (303 observations). Our choice of explanatory variables is guided by the theory of job search behaviour analysed in the previous sections and broadly correspond to those found in other similar studies. The variables are those that we have defined in our estimation of the determinants of labour force participation. Findings are presented in Table 5 separately for males and females.
Although the test results in the previous section indicated that ILO-U and Nd are in many respects similar, the estimates on the determinants of engaging in job search from Table 5 suggest that there are also some behavioural differences between them. For males only, the estimates suggest that the likelihood of engaging in job search increases with age (but at a decreasing rate). For females, this likelihood increases with education, but is only significant for those having completed upper-secondary education. Perhaps due to the stronger attachment to the labour market of males regardless of their education level, none of the coefficients on the educational dummies are significant. Consistent with findings on the determinants of labour supply summarised presented above, for females the estimates suggest that being married lowers the likelihood of engaging in job search ceteris paribus. Perhaps due to the search environment, urban females are more likely to engage in active job search compared to their rural counterparts. For females, three out of six coefficients of the regional dummies are significant, while for males only one of them is significant and then only at 10 percent level. We do not find a significant effect of household incomes (labour or non-labour) on the probability of engaging in job search.

Table 5: Estimates from the Probit Model for Engaging in Active Job Search

Explanatory variables Males Females
Coeff. t-test Coeff. t-test
Constant -0.434 -0.73 -0.263 -0.41
Personal characteristics
Age 0.106 2.98 0.044 1.03
Age squared -0.002 -3.48 -0.001 -1.02
Upper-secondary education 0.162 1.21 0.412 3.60
Higher education -0.008 -0.03 0.398 1.35
Married -0.001 -0.01 -0.258 -2.17
Female age 25-40 -0.115 -0.82
Household characteristics
A household member is emigrant -0.198 -1.42 -0.220 -1.61
Household labour incomes per capita 0.001 0.45 0.001 0.84
Household non-labour incomes per capita 0.002 0.80 -0.002 -1.25
Regional dummies
Residence (urban) 0.129 0.98 0.352 3.09
Prizren -0.227 -1.21 0.030 0.18
Peja -0.359 -1.81 0.405 2.12
Mitrovica -0.025 -0.13 0.131 0.89
Gjilan -0.068 -0.32 0.381 2.11
Ferizaj -0.140 -0.66 -0.018 -0.09
Gjakova -0.086 -0.25 1.019 2.22
Log likelihood -291.5 -415.9
Likelihood Ratio test, %2(16) 37.52 68.02
Pseudo R-squared 0.061 0.077
Mean dependent variable 0.871 0.752
Sample size 808 804