The determinants of self-employment entry of Palestinian youth

Abstract

PurposeThis paper aims to study the impact of micro-level socio-economic, demographic and geographical factors on the likelihood of self-employment entry of young adults in Palestine and filling a gap in the analysis of determinants of self-employment for young adults in Palestine.Design/methodology/approachThe research design is based on a multinomial logistic (MNL) model and on the testing of seven hypotheses deriving from the review of the theoretical and empirical literature, using a micro-level longitudinal data set from the Palestinian Labour Force Surveys (PLFS) between 2009 and 2016. In the analysis, the dependent variable (employment status) is a discrete variable that takes four unordered and independent outcomes: wage employee, self-employed, employer and unpaid family member.FindingsThis study has strong evidence that the likelihood of self-employment increases with age. However, results are inconsistent with the well-known curvilinear relationship between age and self-employment. Regarding the role of gender, results show that young men are more likely to become self-employed than young women. Results indicate that there is a significant and negative impact of an increasing level of education on self-employment entry for both youth and the whole population. On the opposite, training after graduation increases the likelihood of self-employment entry for youth with high education level. Besides, this paper finds that young workers living in urban areas have more likelihood to enter self-employment than those in rural areas and young workers in Gaza have more likelihood to enter self-employment than their counterparts in West Bank.Practical implicationsFirst, in both West Bank and Gaza, young women are less inclined to actively engage in self-employment, which confirms structural inequalities between men and women. Therefore, this study calls for social protection programmes and for national programmes that would promote and develop women’s self-employment. Second, because this paper finds that youth self-employment is more an opportunity-driven phenomenon than a necessity-driven one, this study calls for programmes that provide youth with small business grants and training on entrepreneurship and business models.Originality/valueInsights are valuable as both government institutions and universities and entrepreneurial startups can benefit from knowing which factors contribute to the self-employment likelihood of youth in Palestine and use the policy recommendations to develop capacity-building programmes to provide the youth and women with skills and competencies which enable them to turn to self-employment.