On the misery of losing self-employment

Hetschko, Clemens

doi:10.1007/s11187-016-9730-0

Cited by 33 publications

(19 citation statements)

References 52 publications

(18 reference statements)

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“…Thus, because it is more difficult to separate professional from personal failure, as the identity of the entrepreneur is often closely tied to the business, people who enter unemployment after a business loss may be more likely to fare less well psychologically compared with their counterparts who transition to unemployment from salaried employment. The magnitude of the drop in psychological well-being following a self-employment exit may be higher than that of losing a salaried job, even if both groups end up at the same level of subjective well-being as unemployed (Hetschko 2016). This is because the self-employed workers have higher ex-ante well-being levels than salaried workers (Benz and Frey 2008a).…”

Section: Previous Literature Theory and Hypothesesmentioning

confidence: 98%

“…Finally, business failure can lead to substantial financial losses that exceed the declines in income associated with losing a salaried job. Self-employed people are more likely to run into debt and are less likely to receive unemployment insurance benefits than their counterparts in salaried employment (Hetschko 2016;Parker 2019). In addition, the most common source of start-up capital is the entrepreneur's own savings (Parker 2019;Shane 2008).…”

Section: Previous Literature Theory and Hypothesesmentioning

confidence: 99%

“…First, unlike previous studies, which mostly focus on the positive effects of self-employment, we examine changes in both life and health satisfaction as a consequence of self-employment exits. As such, we build on and extend the work by Hetschko (2016), which, to the best of our knowledge, is the only contribution concerning the psychological costs of losing self-employment in the economics literature to date. Specifically, Hetschko (2016) shows that losing self-employment can lead to more substantial declines in life satisfaction than unemployment due to plant closings.…”

Section: Introductionmentioning

confidence: 99%

“…As such, we build on and extend the work by Hetschko (2016), which, to the best of our knowledge, is the only contribution concerning the psychological costs of losing self-employment in the economics literature to date. Specifically, Hetschko (2016) shows that losing self-employment can lead to more substantial declines in life satisfaction than unemployment due to plant closings. We also compare and contrast the selfreported health and life satisfaction changes of those who involuntarily lose self-employment with those who involuntarily lose a salaried job.…”

Section: Introductionmentioning

confidence: 99%

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The perceived well-being and health costs of exiting self-employment

2020

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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 SocioEconomic Panel from 1985 to 2017 and a difference-indifferences estimator. We find that while transitioning from self-employment to salaried employment 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. Meanwhile, leaving self-employment has no consequences for selfreported physical health and behaviors such as smoking and drinking, implying that the costs of losing selfemployment are mainly psychological. Moreover, former business owners fail to adapt to an involuntary selfemployment exit even 2 or more years after this traumatic event. Our findings imply that policies encouraging entrepreneurship should also carefully consider the nonmonetary implications of business failure.

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Section: Previous Literature Theory and Hypothesesmentioning

confidence: 98%

Section: Previous Literature Theory and Hypothesesmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

The perceived well-being and health costs of exiting self-employment

2020

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“…Similarly, previous studies that compare wellbeing among entrepreneurs, instead of comparing entrepreneurs with employees, suggest higher levels of well-being associated with higher levels of autonomy, job control, and time flexibility (Schjoedt 2009;Stephan 2018), as well as with the presence of social capital, in the form of support from family and peers (Nguyen and Sawang 2016). Yet entrepreneurs' well-being tends to suffer to the extent they struggle to balance work and private roles-which is particularly challenging for female entrepreneurs (Lee Siew Kim and Seow Ling 2001; Schjoedt 2013)-and face threats of business failure (Hetschko 2016).…”

Section: Entrepreneurship and Work-related Well-beingmentioning

confidence: 99%

Doing Good, Feeling Good? Entrepreneurs’ Social Value Creation Beliefs and Work-Related Well-Being

2020

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Entrepreneurs with social goals face various challenges; insights into how these entrepreneurs experience and appreciate their work remain a black box though. Drawing on identity, conservation of resources, and person–organization fit theories, this study examines how entrepreneurs’ social value creation beliefs relate to their work-related well-being (job satisfaction, work engagement, and lack of work burnout), as well as how this process might be influenced by social concerns with respect to the common good. Using data from the German Public Value Atlas 2015 and 2019 and the Swiss Public Value Atlas 2017, a three-study design analyzes three samples of entrepreneurs in Germany and Switzerland. Study 1 reveals that entrepreneurs report higher job satisfaction when they believe their organization creates social value. Study 2 indicates that these beliefs relate negatively to work burnout; entrepreneurs’ perceptions of having meaningful work mediate this relationship. Study 3 affirms and extends these results by showing that a sense of work meaningfulness mediates the relationship between social value creation beliefs and work engagement and that this mediating role is more prominent among entrepreneurs with strong social concerns. This investigation thus identifies a critical pathway—the extent to which entrepreneurs experience their work activities as important and personally meaningful—that connects social value creation beliefs with enhanced work-related well-being, as well as how this process might vary with a personal orientation that embraces the common good.

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Happiness, Work, and Identity

Hetschko

Knabe

Schoeb

2021

Handbook of Labor, Human Resources and Population Economics

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This chapter introduces identity utility to the study of (un)employment and (un)happiness. The concept is described in terms of an augmented utility function, the implications of which are assessed in light of the empirical literature on unemployment and well-being. Studies on unemployed persons' affective and cognitive well-being allow assessing the importance of the loss of identity utility relative to other nonmonetary consequences of joblessness, such as fewer social contacts and a lack of a structure in daily life. Unlike life satisfaction, unemployment leaves affective well-being mostly unaffected, which points to a major relevance of the loss of identity. This view is corroborated further by studies on the importance of the social norms to work and be self-reliant for the life satisfaction of the unemployed, as well as by studies showing the positive life satisfaction effect of retirement on unemployed workers. Based on this strong evidence for identity utility losses of unemployed persons, the notion of identity utility is used to explain heterogeneity in the effect of unemployment on life satisfaction. It is also linked to further consequences of unemployment, such as social exclusion and stigmatization. Moreover, this chapter uses identity utility to assess the likely effectiveness of labor market policies in alleviating the misery of the unemployed. Finally, research on work, happiness and identity is reconciled with a more standard economics view on labor supply based on studies examining the impact of working hours on workers' well-being.

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On the misery of losing self-employment

Cited by 33 publications

References 52 publications

The perceived well-being and health costs of exiting self-employment

The perceived well-being and health costs of exiting self-employment

Doing Good, Feeling Good? Entrepreneurs’ Social Value Creation Beliefs and Work-Related Well-Being

Happiness, Work, and Identity

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