The perceived well-being and health costs of exiting self-employment / Milena Nikolova (University of Groningen, IZA and The Brookings Institution), Boris Nikolaev (Baylor University), Olga Popova (IOS, CERGE-EI and Ural Federal University) ; IZA Institute of Labor Economics
VerfasserNikolova, Milena ; Nikolaev, Boris ; Popova, Olga
KörperschaftForschungsinstitut zur Zukunft der Arbeit
ErschienenBonn, Germany : IZA Institute of Labor Economics, April 2020
Elektronische Ressource
Umfang1 Online-Ressource (39 Seiten) : Diagramme
SerieDiscussion paper ; no. 13187
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The perceived well-being and health costs of exiting self-employment [1.32 mb]
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We explore how involuntary and voluntary exits from self-employment affect life and health satisfaction. To that end, we use rich longitudinal data from the German Socio-Economic Panel from 1985 to 2017 and a difference-in-differences estimation. Our findings suggest that while transitioning from self-employment to salaried employment (i.e., a voluntary self-employment exit) brings small improvements in health and life satisfaction, the negative psychological costs of business failure (i.e., switching from self-employment to unemployment) are substantial and exceed the costs of involuntarily losing a salaried job (i.e., switching from salaried employment to unemployment). Meanwhile, leaving self-employment has no consequences for selfreported physical health and behaviors such as smoking and drinking, implying that the costs of losing self-employment are largely psychological. Moreover, former business owners fail to adapt to an involuntary self-employment exit even two or more years after this traumatic event. Our findings imply that policies encouraging entrepreneurship should also carefully consider the costs of business failure.

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