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

Milena Nikolova, Boris Nikolaev () and Olga Popova
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Boris Nikolaev: Baylor University

Small Business Economics, 2021, vol. 57, issue 4, No 11, 1819-1836

Abstract: 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 Socio-Economic Panel from 1985 to 2017 and a difference-in-differences 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 self-reported physical health and behaviors such as smoking and drinking, implying that the costs of losing self-employment are mainly psychological. Moreover, former business owners fail to adapt to an involuntary self-employment 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.

Keywords: Entrepreneurship; Self-employment; Health; Well-being; Unemployment; Job switches; E24; I10; I31; J28; L26 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (5)

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Related works:
Working Paper: The Perceived Well-Being and Health Costs of Exiting Self-Employment (2020)
Working Paper: The Perceived Well-being and Health Costs of Exiting Self-Employment (2020)
Working Paper: The Perceived Well-being and Health Costs of Exiting Self-Employment (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:kap:sbusec:v:57:y:2021:i:4:d:10.1007_s11187-020-00374-4

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DOI: 10.1007/s11187-020-00374-4

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