The Effects of Government Quality and Economic Indicators on Self-employment in East Africa: Panel Data Analysis

Abstract

Self-employment plays a major role in the economic growth of Africa in general and East African countries in particular. It is a major source of new jobs and a way of employing the entrepreneurial abilities of the population. Moreover, self-employment allows people to do what they want and to follow their passion. However, populations in East Africa face various barriers that hinder their ability to start their own business and/or to become self-employed. Thus, the aim of this study is to examine the effects of government quality and economic indicators on self-employment. Data was taken for this study from World Bank’s World Development Indicators, Worldwide Governance Indicators, African development Bank and United Nations Development Program for eight East African countries for 2010-2018. The countries were selected based on the availability of panel data. The fixed effects result indicated that political Stability, control of corruption indices and Voice and accountability, natural logarithm of electricity access, mobile phone subscriptions, people living below income poverty line and primary education enrolment are favorably affecting self-employment in East Africa. The result also shows that the natural logarithm of employment in industry and real GDP growth have negative coefficients. . These findings suggest that in addition to economic and social indicators government quality have greater effect on self-employment in East Africa.

Keywords: Self-employment; fixed effects; Hausman test; Government quality indicators; Panel data; East Africa.

DOI: 10.7176/JESD/11-9-05

Publication date:May 31^st 2020