Subsidised training and youth employment: Distinguishing unobserved heterogeneity from state dependence in labour market histories

Using the 1990-2 wave of the French Labour Force Survey to study the employ ment histories of young people I consider transitions between six labour ma rket states: employment contracts whether permanent or temporary, unemploym ent, training, education and non-participation. I use a fixed effect estima tor in a dynamic multinomial logit model which can accommodate any form of unobserved heterogeneity in levels. This analysis can be extended to Markov processes of any order. I relate heterogeneity components to individual an d family characteristics by using simulated maximum likelihood methods. The se procedures allow evaluation of the effects training schemes have on yout h employment histories.