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Abstract
Various studies on the Ethiopian economy in general and the urban sector in
particular have stated about the staggering level of unemployment in the country.
Rapidly growing population and a less than satisfactory performance in economic
growth over the years, among others, are to blame for this situation. That the
unemployment situation is particularly rampant among the youth which constitutes
over a third of the population calls for an urgent intervention aimed at improving the
fate of the unemployed. Promoting self-employment forms an integral part of any
intervention aimed at reducing unemployment. Given this, studying the determinants
of self-employment is essential by way of informing concerned parties as to factors
important in encouraging self-employment. As well as surveying the relevant
literature, the study undertakes an empirical investigation into the nature of selfemployment
using data from a unique panel data set, the Ethiopian Urban Socio-
Economic Survey. Findings of the study give some evidence that self-employment is
largely a route out of unemployment rather than being something driven by
entrepreneurship. It also finds a declining trend in the patterns of self-employment
over the study period. Very few studies have looked into issues relating to selfemployment
in the context of developing countries in general, and none in the case of
Ethiopia. As such, this study serves an important role shedding some light on issues
pertaining to self-employment.