Effect Of Social Capital On Labor Force Participation In Kenya

Abstract

The aim of this study was to examine the effect of social capital on labor force participation in Kenya. Whereas human capital is necessary, social capital is an adequate factor for successful participation in the labor force in the country. More specifically, social capital was found to be a resourceful tool in allocation and distribution of labor market information to job seekers thus facilitating an efficient search and matching process. Symmetric flow of information drives the labor market towards an efficient equilibrium, mitigating possibilities of market failure due to asymmetry of information in the search and matching process. In realizing the objective of the study, data from the 2015/16 Kenya Integrated Household Budget Survey was used in the analysis. The control function approach proved powerful in addressing endogeneity. Estimation of effect of social capital on labor force participation was done using Tobit model. The findings indicated that social capital has a positive and statistically significant effect on labor force participation in Kenya. Specifically, if an individual’s stock of social capital increased by 1%, labor force participation was found to increase by 2.65%. Males were found to participate in the labor force for more hours (.35) than females. Individuals living in urban areas were similarly found to participate in the labor force for more hours (.035) than those in rural areas. Every 1% increase in an individual’s age was found to be associated with a 1.1% improvement in labor force participation. Individuals possessing KCPE, KCSE, DIPLOMA, and DEGREE had an average labor force participation of .15, .30, .19, and .08 hours more than those with no educational attainment. Economic agents possessing the post-graduate level of educational attainment were, however, found to have lower labor force participation (1.58 hours) compared to those with no educational qualification.