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Scarred for life: Lasting consequences of unemployment and informal self-employment

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  • Pritadrajati, Dyah S.
  • Kusuma, Anggita C.M.
  • Saxena, Sweta C.

Abstract

The scarring theory predicts that the effect of present unemployment will potentially last for the individual’s entire remaining working lifetime. This paper investigates how self-employment in the informal sector, rather than unemployment per se, influences the scarring effects in Indonesia, where informality is prevalent. It finds that the scarring effect due to previous unemployment is more observable among senior workers, while that due to previous self-employment is more significant among young workers aged 25–34 years. This indicates limited opportunity for human capital accumulation in self-employment and/or use of this information as an indicator of low productivity by employers.

Suggested Citation

  • Pritadrajati, Dyah S. & Kusuma, Anggita C.M. & Saxena, Sweta C., 2021. "Scarred for life: Lasting consequences of unemployment and informal self-employment," Economic Analysis and Policy, Elsevier, vol. 70(C), pages 206-219.
    • Handle: RePEc:eee:ecanpo:v:70:y:2021:i:c:p:206-219
    DOI: 10.1016/j.eap.2021.02.009
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    More about this item

    Keywords

    Scarring effect; Human capital; Unemployment; Self-employment;
    All these keywords.

    JEL classification:

    • I25 - Health, Education, and Welfare - - Education - - - Education and Economic Development
    • I28 - Health, Education, and Welfare - - Education - - - Government Policy
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J48 - Labor and Demographic Economics - - Particular Labor Markets - - - Particular Labor Markets; Public Policy

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