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On the Misery of Losing Self-Employment

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  • Clemens Hetschko

Abstract

German Socio-Economic Panel data is used to show that the decrease in life satisfaction caused by an increase in the probability of losing work is higher when self-employed than when paid employed. Further estimations reveal that becoming unemployed reduces self-employed workers’ satisfaction considerably more than salaried workers’ satisfaction. These results indicate that losing self-employment is an even more harmful life event than losing dependent employment. Monetary and non-monetary reasons seem to account for the difference between the two types of work. Moreover, it originates from the process of losing self-employment and the consequences of unemployment rather than from advantages of self-employment.

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  • Clemens Hetschko, 2014. "On the Misery of Losing Self-Employment," SOEPpapers on Multidisciplinary Panel Data Research 699, DIW Berlin, The German Socio-Economic Panel (SOEP).
    • Handle: RePEc:diw:diwsop:diw_sp699
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    Cited by:

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    2. Martin Binder, 2017. "Entrepreneurial Success and Subjective Well-Being: Worries about the Business Explain One's Well-Being Loss from Self-Employment," SOEPpapers on Multidisciplinary Panel Data Research 947, DIW Berlin, The German Socio-Economic Panel (SOEP).
    3. Giacomo Corneo, 2015. "Income inequality from a lifetime perspective," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 42(2), pages 225-239, May.
    4. Helmut Bester & Matthias Dahm, 2018. "Credence Goods, Costly Diagnosis and Subjective Evaluation," Economic Journal, Royal Economic Society, vol. 128(611), pages 1367-1394, June.
    5. Bartels, Charlotte & Jenderny, Katharina, 2014. "The role of capital income for top incomes shares in Germany," Discussion Papers 2014/32, Free University Berlin, School of Business & Economics.
    6. Adrian Chadi & Clemens Hetschko, 2021. "How Job Changes Affect People's Lives — Evidence from Subjective Well‐Being Data," British Journal of Industrial Relations, London School of Economics, vol. 59(2), pages 279-306, June.
    7. Binder, Martin & Blankenberg, Ann-Kathrin, 2021. "Self-employment and subjective well-being," University of Göttingen Working Papers in Economics 411, University of Goettingen, Department of Economics.
    8. Otrachshenko, Vladimir & Popova, Olga & Nikolova, Milena & Tyurina, Elena, 2022. "COVID-19 and entrepreneurship entry and exit: Opportunity amidst adversity," Technology in Society, Elsevier, vol. 71(C).
    9. Juan A. Marin-Garcia & Tomas Bonavia & Josep-Maria Losilla, 2020. "Changes in the Association between European Workers’ Employment Conditions and Employee Well-Being in 2005, 2010 and 2015," IJERPH, MDPI, vol. 17(3), pages 1-22, February.
    10. Hetschko, Clemens & Knabe, Andreas & Schöb, Ronnie, 2021. "Happiness, Work, and Identity," GLO Discussion Paper Series 783, Global Labor Organization (GLO).
    11. Milena Nikolova & Boris Nikolaev & Olga Popova, 2021. "The perceived well-being and health costs of exiting self-employment," Small Business Economics, Springer, vol. 57(4), pages 1819-1836, December.
    12. Teita Bijedić & Alan Piper, 2018. "Different Strokes for Different Folks: Entrepreneurs' Job Satisfaction and the Intersection of Gender and Migration Background," SOEPpapers on Multidisciplinary Panel Data Research 1011, DIW Berlin, The German Socio-Economic Panel (SOEP).
    13. Hattendorff, Christian, 2014. "Natural resources, demand for external finance and financial development," Discussion Papers 2014/33, Free University Berlin, School of Business & Economics.
    14. Nikolova, Milena, 2019. "Switching to self-employment can be good for your health," Journal of Business Venturing, Elsevier, vol. 34(4), pages 664-691.
    15. Amina Ahmed Lahsen & Alan T. Piper, 2019. "Property rights and intellectual property protection, GDP growth and individual well-being in Latin America," Latin American Economic Review, Springer;Centro de Investigaciòn y Docencia Económica (CIDE), vol. 28(1), pages 1-21, December.
    16. Jianbo Luo, 2020. "A Pecuniary Explanation for the Heterogeneous Effects of Unemployment on Happiness," Journal of Happiness Studies, Springer, vol. 21(7), pages 2603-2628, October.
    17. Suppa, Nicolai, 2021. "Unemployment and subjective well-being," GLO Discussion Paper Series 760, Global Labor Organization (GLO).
    18. Steven A. Brieger & Dirk Clercq & Timo Meynhardt, 2021. "Doing Good, Feeling Good? Entrepreneurs’ Social Value Creation Beliefs and Work-Related Well-Being," Journal of Business Ethics, Springer, vol. 172(4), pages 707-725, September.
    19. Odermatt, Reto & Powdthavee, Nattavudh & Stutzer, Alois, 2021. "Are newly self-employed overly optimistic about their future well-being?," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 95(C).
    20. Nikolova, Milena, 2018. "Self-Employment Can Be Good for Your Health," GLO Discussion Paper Series 226, Global Labor Organization (GLO).
    21. Koch, Michael & Park, Sarah & Zahra, Shaker A., 2021. "Career patterns in self-employment and career success," Journal of Business Venturing, Elsevier, vol. 36(1).
    22. Daniyar T. Baitenizov & Igor N. Dubina & David F. J. Campbell & Elias G. Carayannis & Tolkyn A. Azatbek, 2019. "Freelance as a Creative Mode of Self-employment in a New Economy (a Literature Review)," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 10(1), pages 1-17, March.
    23. Panka Bencsik & Tuugi Chuluun, 2021. "Comparative well-being of the self-employed and paid employees in the USA," Small Business Economics, Springer, vol. 56(1), pages 355-384, January.

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    More about this item

    Keywords

    life satisfaction; self-employment; probability of losing work; Unemployment; SOEP;
    All these keywords.

    JEL classification:

    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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