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

Abstract

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.

COVID-19 and entrepreneurship entry and exit: Opportunity amidst adversity

“…Faced with adversity, some business owners may have decided that the COVID-19 crisis was an opportunity to separate from a dysfunctional venture. In that sense, given that closing down a business is a psychologically scarring experience [ 64 , 65 ], the pandemic may have made it more acceptable for failing business owners to terminate their enterprises. These business owners may have been delaying closing the business despite incurring financial losses using anticipatory grief as a mechanism [ 66 ].…”

Sometimes Your Best Just Ain’t Good Enough: The Worldwide Evidence on Subjective Well-being Efficiency

“…However, a large body of recent economic research shows that adaptation to income and other aspects of economic and social life is incomplete. For instance, people do not fully adapt to illnesses and do not adapt at all to unemployment, pollution, and the loss of their own business (Clark 2016;Nikolova and Ayhan 2019;Nikolova, Nikolaev, and Popova 2020). Yet, even if there is a complete hedonic adaptation, efficiency analyses can help shed light on reaching given levels of SWB with the least possible levels of resources, which underscores the approach's usefulness.…”

Happiness Management: A Culture to Explore From Brand Orientation as a Sign of Responsible and Sustainable Production

“…Moreover, on the other hand, that income has a significant impact on the wellbeing of human beings (Deaton, 2008;Lakshmanasamy, 2021;Lee and Ohtake, 2021). On the other hand, involuntary exits of people from the labour market hurt their happiness (Nikolova et al, 2020). In line with this research, economists and psychologists have focused on empirically examining the leadership-happiness association in the era of Industry 5.0.…”