The state of the situation

Young men and women in the Arab States 1 face significant barriers to employment. The unemployment rate among youth aged 15-24 currently stands at an estimated 23%, compared with a global average of 13.7%. 2 Although the rate has undoubtedly been exacerbated by the COVID-19 pandemic, 3 unemployment is not a new issue for the region. The Arab States have seen one of the highest rates of unemployment across the world for at least the past three decades - and it has increased over the past 10 years, especially for women. 4 Indeed, the unemployment rate among young women is more than double that of young men, sitting at an estimated 42% compared with 20%. 5 The COVID-19 crisis could widen this gap; UN Women estimates that 700,000 women in the Arab region will lose their jobs as a result of the pandemic. 6 As was the case globally, employment loss in 2020 disproportionately affected women and youth in the Arab States. 7 The pandemic has also dramatically shifted the way that people work. Unfortunately, the gendered nature of access to technology in the Arab region means that women are disproportionately impacted by the shift to remote working. For example, only 51% of women in Iraq have access to the internet, compared with 98% of men. 8 Across the Arab States, nearly half of women do not have access to the internet or a mobile phone. 9 Young men and women do have greater access to digital technologies than their older counterparts though. In Tunisia, while only 21% of those aged 37 or older report using the Internet at least occasionally and/or owning a smartphone, this jumps to 72% among those aged 18-36. 10 Access to technology can be an opportunity, especially in a COVID-19 world where face-to-face exchanges are less frequent or safe. Promoting entrepreneurship can help to address the unemployment challenge. 11,12 One study of 23 OECD countries from 1974-2002 found that every 1 percentage point increase in self-employment (a common measure of entrepreneurship) predicts a 1.12 percentage point reduction in unemployment eight years later. 13 More youth in the Arab region are interested in working for themselves or their families than they were in 2019, suggesting that there may be an increased interest in entrepreneurship, probably due to the impact of the COVID-19 pandemic. 14 Despite these aspirations, younger people are less likely to be engaged in entrepreneurship than those in older cohorts. 15 Why is this the case? What prevents young people from entering into and succeeding in entrepreneurship? This evidence review aims to highlight the key behavioural barriers to youth entrepreneurship as identified in the literature and what works to promote entrepreneurship. We also identify barriers that are unique to, or exacerbated among, young women. We have examined academic studies (including systematic reviews and meta-analyses which aim to aggregate findings from many studies) as well as grey literature (e.g. institutional research reports, Paving the Path to Successful Youth Entrepreneurship in the Arab States with Behavioural Science 5 working papers, etc.). Where available we focus on findings from the Arab States but also draw on insights from elsewhere when local studies are limited.

Examining entrepreneurship through a behavioural lens

Behavioral insights (BI) is an approach that applies evidence about human behavior to practical problems. Behavioral insights provides a realistic account of how and why humans act the way they do, and encourages the design of policies, products, and services to reflect this understanding. A BI approach takes empirical evidence from the behavioural sciences (like psychology, behavioural economics, and anthropology) and applies it to the real-world problem at hand. At its heart, entrepreneurship is a set of behaviours. Behaviours include identifying market gaps, designing a product or a service, finding customers and suppliers, registering the business, and creating new networks to extend business reach, to name only a few. This is why a behavioural lens can be particularly useful to approach this issue. However, we found that the vast majority of the entrepreneurship research was focused on structural barriers to engaging and succeeding in entrepreneurship. Where available we focus on reviewing the psychological and social factors that have been found to play a role in youth entrepreneurship and we bring a behavioural lens to the most relevant structural factors.

A note on assumptions

In this review we have suggested that increasing youth entrepreneurship will have a positive impact on the employment opportunities and economic growth of the Arab region. However, some researchers have argued that a focus on quantity (encouraging more people into entrepreneurship) may be less effective than a focus on quality (helping start-ups with the most growth potential to succeed). 16 Some businesses will fail and only a subset will go on to generate jobs and enhance economic growth. Good estimates of business failure are difficult to obtain but some have reported failure rates as high as 90%. 17 Moreover, while promoting entrepreneurship in general has been linked to a reduction in unemployment, encouraging only those who are unemployed to start their own businesses seems to be less effective. 18 Entrepreneurship will not always be the best option for individuals either. Consider a young educated Arab woman from rural Jordan with limited financial resources and a job offer in the public sector. The best option for her may be the secure and stable public sector employment rather than taking on the risk and uncertainty of self-employment. In this note, we make the assumption that enabling more young people to engage in entrepreneurship - should they wish to - is a good thing, but note that resources should also go toward supporting existing businesses to grow and create job opportunities for youth in the Arab region