SCHOOL OF GRADUATE STUDIES DETERMINANTS OF URBAN YOUTH UNEMPLOYMENT: THE CASE OF ADAMA CITY, EAST SHOA ZONE, OROMIA NATIONAL REGION- AL STATE By: Supervisor: AHMEDTEYIB KEMAL GIRMA ESTIPHANOS (PhD) A THESIS SUBMITTED TO THE DEPARTMENT OF ECONOMICS IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DE- GREE OF MASTER OF SCIENCE IN ECONOMICS JUNE, 2020 ADDIS ABABA, ETHIOPIA DECLARATION I hereby declare that this thesis entitled ―Determinants of urban youth unemployment: The Case of Adama City has been carried out by me under the guidance and supervision of Dr. Girma Estiphanos. The thesis is original and has not been submitted for the award of any degree or diploma to any university or institutions. Name signature: date Ahmedteyib Kemal -------------------- --------------------- Addis Ababa University School of Graduate Studies This is to certify that the thesis prepared by Ahmedteyib Kemal, entitled: Determinants of urban youth unemployment The Case of Adama City and submitted in partial fulfillment of the re- quirements for the Degree of Master of Science in Economics (Economic policy analysis) com- piles with the regulations of the University and meets the accepted standards with respect to orig- inality and quality. Approval by board of Examiners: Examiner ________________________ Signature __________ Date ___________ Examiner ________________________ Signature __________ Date ___________ Advisor _________________________ Signature __________ Date ___________ ACKNOWLEDGEMENTS Above all, I would like to express my sincere thanks to Almighty Allah for his love, compassion, Mercy and bounteousness. I would like to thank my Advisor, Dr. Girma Estiphanos for his remarkable guidance and genu- ine advice throughout my study. I would also like to thank my best Brother Mr. Mohammed Kemal for their unreserved support and encouragement as well as for their moral and material support during my study. I would like to thank Ms. Lelise Beyene my class mate for their genuine advice and encouraging. My deep appreciation is extended to Ms. Hayat for her indispensable support of typing this re- search paper. My deep appreciation and thanks goes to Adama Municipality officials and other line sector office of the administrator workers. I would like to thank Mr. Abu Aman for his genu- ine feedback, providing reference materials and data. My Special thanks go to Mr. Nuraden jemal, Mr.Zina Regasa, Mr. Abdela Ahmed and Mr. Woyema Beriso for their special support during my education. But not the least, my deepest gratitude goes to my family specially my mother who is source of strength and endurance. At the end, my heartfelt gratitude goes to Addis Ababa University for giving this chance to pur- sue my education and funding the research. i Table of Contents pages Acknowledgement…………………………………………………………………………….......i Table of Content………………..…………………………………………………………….......ii List of Tables……………………………..……………………………………………………...vi List of Figures.……………………………………………………………..………………..…..vi Acronyms………………………………………………………………………………………..vii Abstract…………………………………...…………………………………………………… viii CHAPTER ONE:INTRODUCTION .............................................................................................. 1 1.1 Background of the study ...................................................................................................... 1 1.2 Statement of the Problem ................................................................................................. 3 1.3 Research Question ............................................................................................................ 5 1.4 Objective of the study ...................................................................................................... 6 1.4.1 General Objective ..................................................................................................... 6 1.4.2 Specific Objectives of the Study ............................................................................... 6 1.5 Significance of the Study ................................................................................................. 6 1.6 Scope of the Study............................................................................................................ 7 1.7 Limitations of the Study ................................................................................................... 7 1.8 Organization of Chapters ................................................................................................. 8 CHAPTER TWO:LITERATURE REVIEW .................................................................................. 9 2.1 Theoretical Literature ....................................................................................................... 9 2.1.1 Concepts and Definitions.............................................................................................. 9 2.1.2 Types of unemployment ............................................................................................. 10 2.1.2.1 Structural Unemployment ....................................................................................... 10 2.1.2.2 Frictional Unemployment ....................................................................................... 11 2.1.2.3 Cyclical Unemployment ......................................................................................... 11 2.1.2.4 Seasonal unemployment ......................................................................................... 12 2.1.3 Theories of Unemployment ........................................................................................ 12 2.1.2.1 Human capital theory .............................................................................................. 13 2.1.2.3 Social Capital Theory ............................................................................................. 13 2.1.2.4 The Job-Matching Theory....................................................................................... 14 2.1.2.5 The Theory of Job Search ....................................................................................... 15 2.2 Factors that influence Youth Unemployment ................................................................ 16 2.2.1 Demographic Factors of Youth Unemployment ..................................................... 16 ii 2.2.1.1 Rural Urban Migration ............................................................................................ 16 2.2.1.2 Sex........................................................................................................................... 17 2.2.2 Socio-Economic Factors of Youth Unemployment ................................................ 17 2.2.2.1 Education ................................................................................................................ 17 2.2.2.2 Work Experience .................................................................................................... 18 2.2.2.3 Household income .................................................................................................. 19 2.2.2.4 Mothers and Fathers Education .............................................................................. 20 2.2.2.5 Job Preference ......................................................................................................... 20 2.2.2.6 Social Networks ...................................................................................................... 21 2.3 Consequences of Youth Unemployment ........................................................................ 21 2.4 Economic costs of unemployment ................................................................................. 23 2.5 Empirical Evidences ....................................................................................................... 23 2.6 Conceptual Framework .................................................................................................. 26 CHAPTER THRER ...................................................................................................................... 27 METHODOLOGY ....................................................................................................................... 27 3 Introduction ........................................................................................................................... 27 3.1 Description of the study Area......................................................................................... 27 3.2 Type and Sources of Data .............................................................................................. 29 3.3 Method of Data Collection ............................................................................................. 29 3.4 Sample Technique and Procedures ................................................................................ 30 3.5 Sample size Determination............................................................................................. 30 3.6 Method of Data Analysis................................................................................................ 34 3.7 Model specification ........................................................................................................ 34 3.7.1 Model ...................................................................................................................... 35 3.7.2 Variable Descriptions.............................................................................................. 36 3.7.2.1 Dependent Variable ...............................................................................................