This is an extended and revised version of NBER Working Paper # 3252. We thank the ESRC and the UK Department of Employment for financial assistance. The project has had a long gestation period (the first version was circulated in 1988). Helpful suggestions were made by participants in seminars at Cambridge (UK), LSE, Harvard, Dartmouth, Aberdeen, Glasgow, Guelph, McMaster, Oxford, the London Business School, Swansea, Uppsala, FIEF (Stockholm), and Warwick, and by Peter Abell, Graham Beaver, Joan Beaver, Fran Blau, George Borjas, Mark Casson, Andrew Clark, Robert Cressy, Peter Elias, Roger Gordon, Al Gustman, Tom Holmes, Peter Johnson, Bruce Meyer, Chris Pissarides, Gavin Reid, David Storey, Steve Venti, Alex Zanello, and a referee. AbstractThe factors that affect the supply of entrepreneurs are important but poorly understood. We study a sample of individuals who choose either to be employees or to run their own businesses.Four conclusions emerge. First, consistent with the existence of borrowing constraints on potential entrepreneurs, we find that the probability of self-employment depends markedly upon whether the individual ever received an inheritance or gift.Second, when directly questioned in interview surveys, potential entrepreneurs say that raising capital is their principal problem.Third, consistent with our theoretical framework's predictions, the self-employed have higher levels of job and life satisfaction than employees. Fourth, childhood personality measurements and psychological test scores are of almost no help in predicting who runs their own business later in life. It is access to start-up capital that matters.

This paper estimates micro-econometric happiness equations for the United States and Great Britain. Reported levels of wellbeing have declined over the last quarter of a century in the US; life satisfaction has run approximately flat through time in Britain. These findings are consistent with the Easterlin hypothesis (1974, 1995). The happiness of American blacks, however, has risen. Despite legislation on gender discrimination, the well-being of women has declined. White women in the US have been the biggest losers. Well-being equations have a stable structure. Money buys happiness. People care also about relative income. Wellbeing is U-shaped in age. The paper estimates the dollar values of events like unemployment and divorce. They are large. A lasting marriage (compared to widow-hood as a 'natural' experiment), for example, is estimated to be worth $100,000 a year. 1Well-Being Over Time in Britain and the USA "We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable rights, that among these are life, liberty and the pursuit of happiness." U.S. Declaration of Independence, July 4, 1776.