employment (Hyytinen and Rouvinen, 2008), non‐permanent employment (Yu, 2012) and informal employment (Cruces, Ham and Viollaz, 2012). Theory from the scarring literature argues that human capital depreciation may occur during periods of unemployment or employment in some types of jobs. Human capital depreciation may negatively impact on individuals’ long term labor market prospects. This emerging broader consideration of scarring fits into a concept that we term `labor market scarring’. This paper defines labor market scarring as occurring when there is a negative or zero return to some form of participation in the labor market‐ either unemployment or a certain type of employment. This concept may be particularly applicable to youth in developing countries, where early employment may include self‐employment or work in agriculture that youth engage in simply because they cannot afford to be unemployed, rather than because of career benefits or working conditions.

This paper considers job quality, mobility and labor market scarring in the particular context of Indonesia and is structured as follows: Firstly, in Section 2 we review the broad literature on scarring in labor markets. Section 3 then provides a range of descriptive statistics using data from the Indonesian Family Life Survey (IFLS) waves 1‐4 (1993‐2007). Specifically, the labor market context of Indonesia is introduced in section 3.1, with summary statistics presented for samples of data we use from IFLS. This is followed by consideration of different categories of employment, particularly in terms of human capital enhancing characteristics, wages and non‐pecuniary benefits (Section 3.2). We focus on comparing self‐employment with private sector employment and public sector employment. In section 3.3, we analyze patterns of employment in these different categories of jobs for individuals over the period 1993 to 2007, to find many striking patterns of persistent employment in certain categories of jobs. Self‐employment in particular is identified as a possible candidate for causing labor market scarring. We investigate this further in section 4, which presents fixed effects estimations of the log of monthly wages for youth and older adults. In particular, we compare the implications of periods of self‐employment experience and government and private sector experience for future wage outcomes, finding that self‐ employment may cause scarring for youth. Lastly, section 5 concludes.

# **2. Scarring in Labor Markets and Job Quality**

# **_2.1 Introduction_**

Research on the long term impacts of different forms of labor market participation on labor market outcomes is most sharply focused in the substantial literature on the “scarring effect” of unemployment (Arulampalam, Gregg & Gregory, 2001). That is, for individuals that are unemployed, it is commonly found that the likelihood of future unemployment permanently increases the longer the individual remains unemployed and (possibly) as a direct result of this unemployment. It is hypothesized that underlying the empirical relation is a mechanism driving “true state dependence” across time such as human capital depreciation (Arulampalam, Booth & Taylor, 2000). In addition, when scarred individuals do 3