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

Dyah Pritadrajati, Anggita C.M. Kusuma and Sweta Saxena

Economic Analysis and Policy, 2021, vol. 70, issue C, 206-219

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.

Keywords: Scarring effect; Human capital; Unemployment; Self-employment (search for similar items in EconPapers)
JEL-codes: I25 I28 J24 J48 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecanpo:v:70:y:2021:i:c:p:206-219

DOI: 10.1016/j.eap.2021.02.009

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