The nature of unemployment among young men in urban Ethiopia

This paper investigates the nature of unemployment among young men in urban Ethiopia and finds that it is concentrated among relatively well-educated first-time job seekers who aspire to a public sector job and spend on average close to four years in unemployment. This is consistent with a segmented labor market model where youngsters queue in unemployment for a good job, as confirmed by an empirical test of the theoretical prediction. We observe a negative (causal) relationship between household welfare and both the incidence and duration of unemployment, indicating that unemployment is concentrated among the relatively worse off urban households, which from a national perspective represent the middle classes, and find suggestive evidence that part of this effect is due to malnutrition during childhood. Job search through social networks is only effective after one has become unemployed, suggesting that networks provide insurance only after exposure to the risk.