Entrepreneurial Success and Subjective Well-Being: Worries About the Business Explain One's Well-Being Loss from Self-Employment

39 Pages Posted: 18 Jan 2018

See all articles by Martin Binder

Martin Binder

University of the German Federal Armed Forces - Universität der Bundeswehr München; Bard College - The Levy Economics Institute

Date Written: December 2017

Abstract

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 distinguishing different 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.

Keywords: subjective well-being, self-employment, entrepreneurial success, SOEP, life satisfaction

JEL Classification: I31, L26, J28

Suggested Citation

Binder, Martin, Entrepreneurial Success and Subjective Well-Being: Worries About the Business Explain One's Well-Being Loss from Self-Employment (December 2017). SOEPpaper No. 947, Available at SSRN: https://ssrn.com/abstract=3100865 or http://dx.doi.org/10.2139/ssrn.3100865

Martin Binder (Contact Author)

University of the German Federal Armed Forces - Universität der Bundeswehr München ( email )

Werner-Heisenberg-Weg 39
Neubiberg
Munich, 85579
Germany

Bard College - The Levy Economics Institute ( email )

Blithewood
Annandale-on-Hudson, NY 12504-5000
United States

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