Unemployment Duration in Poor Developing Economies: Evidence from Urban Ethiopia

Abstract

The literature investigating unemployment duration in developing countries is rather scarce. In this paper, parametric and semi-parametric models are estimated to analyze the determinants of unemployment duration in a developing country context. Data from a nationally representative urban household survey in Ethiopia are used. The data reveal that mean unemployment duration in urban Ethiopia is very long—3 years for completed spells and 4.7 years for incomplete spells. The econometric evidence shows that the hazard rate into employment is significantly affected by age, marital status, highest level of education attained, location and support mechanism while unemployed. Ethnic background and gender are not found to be important determinants. Appropriate tests show that these results are not driven by unobservable heterogeneities. The nonparametric hazard function and the baseline hazard retrieved from the semi-parametric estimation reveal a unique shape with alternating signs of duration dependence across a range of years.