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Entrepreneurial worries: Self-employment and potential loss of well-being

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  • Binder, Martin

Abstract

The relationship between self-employment and life satisfaction has been shown to be heterogeneous in the literature. This paper analyzes a channel through which lower well-being can come about for the self-employed, namely, their worries about their business (“entrepreneurial worries”). Using a two-way fixed effects estimator on German panel data (1984–2020), I find no overall effect of becoming self-employed on life satisfaction, and heterogeneity analysis shows that only those self-employed individuals who change from unemployment to self-employment report higher life satisfaction. Mediation analysis reveals that worries about one’s financial situation (and, to some extent, job security) mediate the relationship between self-employment and life satisfaction. Life satisfaction decreases as self-employed individuals worry more about their financial situation as a result of becoming self-employed. Only if one does not worry about one’s financial situation at all does self-employment contribute positively to life satisfaction.

Suggested Citation

  • Binder, Martin, 2024. "Entrepreneurial worries: Self-employment and potential loss of well-being," Journal of Economic Psychology, Elsevier, vol. 105(C).
    • Handle: RePEc:eee:joepsy:v:105:y:2024:i:c:s0167487024000813
    DOI: 10.1016/j.joep.2024.102773
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