Effect of social capital on youth self-employment in Holeta town, Ethiopia

Purpose Social resources have gained considerable interest from scholars for their effect on youth's labor market outcomes. The available evidence indicates that social capital is a crucial factor in determining youth's labor force status. This paper examines the effect of social capital components on youth self-employment in Holeta town, Ethiopia. Design/methodology/approach Using youth survey data, principal component analysis (PCA) was conducted on social capital components datasets. This provided the construction of composite indicators for measuring social capital component, which are robust and exhibited construct validity. Following this, the effect of social capital component on youth self-employment was examined using Logit model. Findings The results show that institutional trust positively affects the likelihood of young people's decision to be self-employed. Practical implications The finding reveals a need to improve the transparency of the institutions' resource delivery, the competency of the institutions' workforce, communication, and information sharing of the institutions with the youth. Originality/value Looking at different social capital components simultaneously, the paper provides insight into the wide range of effects of social capital on youth self-employment.