The Perceived Well-Being and Health Costs of Exiting Self-Employment

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

No 13187, IZA Discussion Papers from Institute of Labor Economics (IZA)

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 estimation. Our findings suggest that while transitioning from self-employment to salaried employment (i.e., a voluntary self-employment exit) 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 (i.e., switching from salaried employment to unemployment). Meanwhile, leaving self-employment has no consequences for selfreported physical health and behaviors such as smoking and drinking, implying that the costs of losing self-employment are largely psychological. Moreover, former business owners fail to adapt to an involuntary self-employment exit even two or more years after this traumatic event. Our findings imply that policies encouraging entrepreneurship should also carefully consider the costs of business failure.

Keywords: entrepreneurship; self-employment; health; well-being; unemployment; job switches (search for similar items in EconPapers)
JEL-codes: E24 I10 I31 J28 L26 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2020-04
New Economics Papers: this item is included in nep-ent, nep-eur, nep-hea, nep-lma and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Forthcoming - published in: Small Business Economics , 2021, 57(4), 1819-1836

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Related works:
Journal Article: The perceived well-being and health costs of exiting self-employment (2021)
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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