Life satisfaction and self-employment: a matching approach
Despite lower incomes, the self-employed consistently report higher satisfaction with their jobs. But are self-employed individuals also happier, more satisfied with their lives as a whole? High job satisfaction might cause them to neglect other important domains of life, such that the fulfilling job crowds out other pleasures, leaving the individual on the whole not happier than others. Moreover, self-employment is often chosen to escape unemployment, not for the associated autonomy that seems to account for the high job satisfaction. We apply matching estimators that allow us to better take into account the above-mentioned considerations and construct an appropriate control group (in terms of balanced covariates). Using the BHPS dataset that comprises a large nationally representative sample of the British populace, we find that individuals who move from regular employment into self-employment experience an increase in life satisfaction (up to 2 years later), while individuals moving from unemployment to self-employment are not more satisfied than their counterparts moving from unemployment to regular employment. We argue that these groups correspond to “opportunity” and “necessity” entrepreneurship, respectively. These findings are robust with regard to different measures of subjective well-being as well as choice of matching variables, and also robustness exercises involving “simulated confounders”.
KeywordsSelf-employment Happiness Matching estimators Unemployment BHPS Necessity entrepreneurship
JEL ClassificationsL26 J24 J28 C21
- Abadie, A., Drukker, D., Herr, J., & Imbens, G. (2004). Implementing matching estimators for average treatment effects in Stata. Stata Journal, 4, 290–311.Google Scholar
- Becker, S. O., & Ichino, A. (2002). Estimation of average treatment effects based on propensity scores. The Stata Journal, 2(4), 358–377.Google Scholar
- BHPS (2009). British Household Panel Survey. http://www.iser.essex.ac.uk/bhps. Accessed 21 December 2011.
- Blanchflower, D. (2004). Self-employment: more may not be better. Swedish Economic Policy Review, 11(2), 15–73.Google Scholar
- Brockhaus, R. (1980). The effect of job dissatisfaction on the decision to start a business. Journal of Small Business Management, 18(1), 37–43.Google Scholar
- Clark, A. E., & Georgellis, Y. (2010). Back to baseline in Britain: Adaptation in the BHPS. Mimeo.Google Scholar
- Craig, J. B., & Schaper, M., & Dibrell, C. (2007). Life in small business in Australia: Evidence from the HILDA Survey. Mimeo.Google Scholar
- Diener, E., & Lucas, R. E. (1999). Personality and subjective well-being. In Kahneman, D., Diener, E., Schwarz, N. (Eds.). Well-being: The foundations of hedonic psychology, Chap. 11 (pp. 213–229). New York: Russell Sage Foundation.Google Scholar
- Frederick, S., & Loewenstein, G. F. (1999). Hedonic adaptation. In: Kahneman, D., Diener, E., Schwarz, N. (Eds.). Well-being: The foundations of hedonic psychology. New York: Russell Sage Foundation, pp. 302–329.Google Scholar
- Heckman, J. J., Ichimura, H., Smith, J., & Todd, P. (1996). Sources of selection bias in evaluating social programs: An interpretation of conventional measures and evidence on the effectiveness of matching as a program evaluation method. Proceedings of the National Academy of Sciences, 93(23), 13416–13420.CrossRefGoogle Scholar
- Kawaguchi, D. (2008). Self-employment rents: Evidence from job satisfaction scores. Hitotsubashi Journal of Economics, 49(1), 35–45.Google Scholar
- Levy, H., & Jenkins, S. P. (2008). Documentation for derived current and annual net household income variables, BHPS waves 1–16. Institute for Social and Economic Research, University of Essex, Colchester.Google Scholar
- Leuven, E., & Sianesi, B. (2003). PSMATCH2: Stata module to perform full Mahalanobis and propensity score matching, common support graphing, and covariate imbalance testing. http://ideas.repec.org/c/boc/bocode/s432001.html. Accessed 21 December 2011.
- Nannicini, T. (2007). Simulation-based sensitivity analysis for matching estimators. Stata Journal, 7(3), 334–350.Google Scholar
- Oakes, J. M., & Kaufman, J. S. (2006). Propensity score matching for social epidemiology. In J. M. Oakes & J. S. Kaufman (Eds.), Methods in Social Epidemiology, Chap. 15 (pp. 364–386). San Francisco: Jossey-Bass/Wiley.Google Scholar
- Shizgal, P. (1999). On the neural computation of utility: Implications from studies of brain stimulation reward. In Kahneman, D., Diener, E., Schwarz, N. (Eds.). Well-being: The foundations of hedonic psychology, pp. 500–524.Google Scholar
- Storey, D. J. (1994). Understanding the small business sector. In Kahneman, D., Diener, E., Schwarz, N. (Eds.). Well-being: The foundations of hedonic psychology. London: Thomson.Google Scholar
- Taylor, M. F. E. (2009). British Household Panel Survey user manual volume A: Introduction, Technical Report and Appendices. Edited with John Brice, Nick Buck and Elaine Prentice-Lane. Colchester: University of Essex.Google Scholar