The Influence of Financial Resource Availability on the Rate of Self-employment in Saudi Arabia

This paper examines the relationship between self-employment rates and the availability of financial resources in Saudi Arabia from 1960 to 2022, focusing on five key variables: unemployment rates, innovation environment, government effectiveness, government expenditure on education, and business start-up costs. Employing the VECM and ARDL methods, the study reveals that financial resources, as indicated by private sector credit, do not significantly impact self-employment rates. Nevertheless, a strong and dynamic environment for innovation significantly boosts self-employment, whereas the effects of unemployment are positive in the short term but negative in the long term. Reducing the expenses associated with starting a business and enhancing the efficiency of government operations has been proven to increase self-employment rates significantly. In addition, increased government spending on education positively impacts self-employment by providing individuals with the essential knowledge and abilities they need. These results underscore the need for comprehensive policies that effectively address multiple factors to promote self-employment, aligning with Saudi Arabia’s economic diversification goals and providing valuable insights for policymakers.