Small Business Economics

, Volume 40, Issue 4, pp 1009–1033 | Cite as

Life satisfaction and self-employment: a matching approach

  • Martin BinderEmail author
  • Alex Coad


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”.


Self-employment Happiness Matching estimators Unemployment BHPS Necessity entrepreneurship 

JEL Classifications

L26 J24 J28 C21 



No individuals were mistreated during our matching procedures. We are grateful to Tom Broekel, Rob Byrne, Jan Fagerberg, Steffen Künn, Ben Martin, Maria Savona, Josh Siepel, Jagannadha Pawan Tamvada, Dagmara Weckowska, Ulrich Witt and seminar participants at SPRU (University of Sussex) and Kingston University, and also to Bram Timmermans for some interesting suggestions, comments, etm. We also want to thank two anonymous referees for many invaluable comments and suggestions. The authors are grateful for having been granted access to the BHPS data set, which was made available through the ESRC Data Archive. The data were originally collected by the ESRC Research Centre on Micro-Social Change at the University of Essex (now incorporated within the Institute for Social and Economic Research). Neither the original collectors of the data nor the Archive bear any responsibility for the analyses or interpretations presented here. Any remaining errors are ours alone. We are grateful for financial support from the ESRC, TSB, BIS and NESTA on grants ES/H008705/1 and ES/J008427/1 as part of the IRC distributed projects initiative. Alex Coad also received funding from the AHRC as part of the FUSE project.


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Copyright information

© Springer Science+Business Media, LLC. 2012

Authors and Affiliations

  1. 1.Evolutionary Economics GroupMax Planck Institute of Economics JenaGermany
  2. 2.SPRUUniversity of SussexFalmer, BrightonUK

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