Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/216105
Authors: 
Nikolova, Milena
Nikolaev, Boris
Popova, Olga
Year of Publication: 
2020
Series/Report no.: 
GLO Discussion Paper 527
Abstract: 
We explore how involuntary and voluntary exits from self-employment affect life and health satisfaction. To that end, we use rich longitudinal data from the German Socio-Economic Panel from 1985 to 2017 and a difference-in-differences estimation. Our findings suggest that while transitioning from self-employment to salaried employment (i.e., a voluntary self-employment exit) brings small improvements in health and life satisfaction, the negative psychological costs of business failure (i.e., switching from self-employment to unemployment) are substantial and exceed the costs of involuntarily losing a salaried job (i.e., switching from salaried employment to unemployment). Meanwhile, leaving self-employment has no consequences for selfreported physical health and behaviors such as smoking and drinking, implying that the costs of losing self-employment are largely psychological. Moreover, former business owners fail to adapt to an involuntary self-employment exit even two or more years after this traumatic event. Our findings imply that policies encouraging entrepreneurship should also carefully consider the costs of business failure.
Subjects: 
entrepreneurship
self-employment
health
well-being
unemployment
job switches
JEL: 
E24
I10
I31
J28
L26
Document Type: 
Working Paper

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