Looking Beyond Gross Domestic Product: Self-Employment and Social Progress Index in Africa

Abstract

This study aims to look beyond Gross Domestic Product: Self-employment and the Social Progress Index in Africa. The period concerned in the study stretches from 2014-2019. For our panel data analysis, the pooled OLS regression model was used to investigate the effect of the SPI and its dimensions on self-employment in Africa. The stand of the research is that the SPI is a measure complementing GDP for efficient measurement of social development. In this regard, the impact of GDP on self-employment is also scrutinized. The random effect and the fixed effect models have also been considered in our regression analysis to account for the impacts of variables in observation at the country level. The independent variables included the Social progress index (SPI_ALL), Basic Human Needs (SPI_NEEDS), Foundation of Well-being (SPI_FOUN), Opportunity (SPI_OPP), and Gross Domestic Product per capita at Purchasing Power Parity (GDPC_PPP). The unemployment total, population total, and inflation rate at the consumer price index were included as control variables.

The results from the pooled OLS show an inverse and statistically significant relationship between SPI_ALL and self-employment. This implies that the Social Progress Index can serve as a robust information source in decision-making at the state and individual business levels. GDPC_PPP also has a negative and significant relationship with self-employment. This might be due to the ‘necessity’ character of self-employment in its majority in Africa. However, the Basic Human Needs, a dimension of the SPI, has a positive and significant relationship with self-employment, suggesting that an increase in this dimension’s components scores can carry the self-employment figures even higher. The other 2 dimensions of the SPI have a negative and significant relationship with self-employment.

The results from the random effect model are not quite significant only for the GDPC_PPP, where we still see a negative and significant relationship with self-employment. Whereas the fixed effect model demonstrates a more significant relationship between SPI_NEEDS and self-employment (positive) and SPI_OPP and self-employment (negative)