SOEPpapers on Multidisciplinary Panel Data Research No. 947
Despite lower incomes the self-employed often report higher job satisfaction. But this increased job satisfaction only sometimes translates into higher life satisfaction, likely due to the heterogeneous nature of self-employment. By distinguishingdifferent types of self-employment, this paper sheds light onto why some self-employeds even report lower life satisfaction, focussing specifically on poor performance enterprises, a prevalent but disregarded type of entrepreneurship. Using German panel data (1984-2015), I find that self-employment (compared to employment) typically negatively impacts on life satisfaction, especially so if one enters self-employment from unemployment, earns low incomes from self-employment or has no employees. Worries about one's financial situation and job security appear to be the driving forces behind this negative effect. Only very few self-employeds report higher life satisfaction, a boost that seems to relate to the pursuit of entrepreneurial opportunities. In sum, looking at the average self-employed obscures the heterogeneity of well-being impacts resulting from different types of self-employment one might find themselves in, and being on the lower end of the success distribution carries a well-being cost instead of bringing joy.
subjective well-being self-employment entrepreneurial success SOEP life satisfaction