A study was conducted to address the question of what impact the expansion of employment and training programs for youth (such as the Youth Employment Demonstration Projects Act of 1977) is likely to have on employment and unemployment of young people. The method used in the analysis was to specify a model (similar to the Markov model) of the youth labor market which focuses on turnover flows between employment, unemployment, and school; and then to introduce employment and training programs and determine their impact on employment and unemployment both in the short-run and the long-run. The theoretical model identifies those program characteristics which are important in affecting employment and unemployment: (1) the extent to which the program is targeted at a particular group, e.g., the unemployed, low income, etc.; (2) the placement rates of individuals leaving the program; (3) the scale of the program; (4) the timing of the program; and (5) whether or not the program changes the participants' longer-term labor market success. Using these factors, it was predicted that the impact of spending $500 million more on youth employment programs would mean a reduction in unemployment rates of between 0.1 and 0.9, depending on the assumptions made. The study laid the foundation for future examination of these issues with manipulation of different variables. (KC)