Employment and unemployment duration in less developed regions

Purpose – The purpose of this paper is to examine the distribution of labor market experience among the unemployed in a less developed area in Greece (the north-western region of Epirus), where unemployment has severe detrimental repercussions on the local workforce. Design/methodology/approach – The paper uses a dataset, obtained through purpose built questionnaires used to assist the local authority in carrying out a regional, pilot, active labor market policy project financed by the European Commission and the Greek Government. Findings – An ordinary least square regression was applied correcting for incidental truncation, in order to show that the duration of the prior unemployment spell negatively affects the duration of the current employment spell and vice versa, which highlights the phenomenon of an “unemployment trap”. Furthermore, those personal and socioeconomic characteristics which are responsible for causing jobless individuals to be “trapped” in the unemployment state are identified. Workers aged above 45, women, employees in sales and other service occupations, face significantly shorter complete spells of employment, along with longer duration of unemployment, hence suffering from self-reinforcing unemployment. Originality/value – The results show that a “scarring effect” appears to be in operation, as the duration of prior unemployment spell has deleterious effects on the duration of the subsequent employment and vice versa. This evidence provides additional insights for policymakers, who design measures for individuals vulnerable to unemployment in the less developed regions of the European Union.