A Dynamic Analysis of Skill Formation and NEET status

Daniel Gladwell, Gurleen Popli and Aki Tsuchiya

Abstract

This paper uses a dynamic Structural Equation Model to investigate the determinants of NEET (Not in Education, Employment or Training) status in adolescents. We model: the cumulative formation of cognitive ability over multiple periods through the life of the young person, up to completion of compulsory education; and the impact that cognitive ability has on NEET status at one and two years after compulsory education. Within this framework we address the issue of latent heterogeneity across individuals. The analysis finds that cognitive ability remains the key predictor of NEET status, and explains the persistence in NEET status. We also find evidence of significant indirect effects (of magnitudes similar to direct effects of ability) of aspirations of the young person and their parents in the prevention of NEET status. Health (general and mental) plays an important role in ability formation and in explaining NEET status; however, its impact differs between the sexes.