Self-employment and satisfaction with life, work, and leisure

Abstract

The aim of this study is to provide an explanation for the finding in earlier studies that the self-employed are, on average, more satisfied with their work than the paid employed are, although they are not more satisfied with their life in general. Fixed-effects regressions are performed with German Socio-Economic Panel data (1984–2012) to investigate how a labor market switch from paid employment to self-employment influences life, work, and leisure satisfaction. The results indicate that switching to self-employment benefits work satisfaction but not life satisfaction. The benefits for work satisfaction are pro- nounced and relatively persistent but accompany large and persistent decreases in leisure satisfaction. Life satisfaction for the switchers to self-employment is consequently on par with the life satisfaction of the non-switchers. Contrasting the switch to self- employment (out of paid employment) with the switch to paid employment (out of self- employment) shows that the detrimental effect on leisure satisfaction distinguishes a switch to self-employment from a switch to paid employment. In conclusion, the results explain why increases in life satisfaction are generally absent for individuals switching to self-employment and why undetermined evidence has been found in previous studies in terms of gains in life satisfaction.