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Are Self-Employed Really Happier Than Employees? An Approach Modelling Adaptation and Anticipation Effects to Self-Employment and General Job Changes

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  • Hanglberger, Dominik

    ()
    (Leuphana University Lüneburg)

  • Merz, Joachim

    ()
    (Leuphana University Lüneburg)

Abstract

Empirical analyses using cross-sectional and panel data found significantly higher levels of job satisfaction for self-employed than for employees. We argue that those estimates in previous studies might be biased by neglecting anticipation and adaptation effects. For testing we specify several models accounting for anticipation and adaptation to self-employment and job changes. Based on data from the German Socio-Economic Panel Survey (SOEP) we find that becoming self-employed is associated with large negative anticipation effects. In contrast to recent literature we find no specific long term effect of self-employment on job satisfaction. Accounting for anticipation and adaptation to job changes in general, which includes changes between employee jobs, reduces the effect of self-employment on job satisfaction by 70%. When controlling for anticipation and adaptation to job changes, we find no further anticipation effect of self-employment and a weak positive but not significant effect of self-employment on job satisfaction for three years. Thus adaptation wipes out higher satisfaction within the first three years being self-employed. According to our results previous studies at least overestimated possible positive effects of self-employment on job satisfaction.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 5629.

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Length: 29 pages
Date of creation: Apr 2011
Date of revision:
Handle: RePEc:iza:izadps:dp5629

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Keywords: job satisfaction; self-employment; hedonic treadmill model; adaptation; anticipation; fixed-effects panel estimations; German Socio-Economic Panel (SOEP);

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  1. Powdthavee, Nattavudh, 2010. "Anticipation, Free-Rider Problem, and Adaptation to Trade Union: Re-examining the Curious Case of Dissatisfied Union Members," IZA Discussion Papers 4806, Institute for the Study of Labor (IZA).
  2. Ada Ferrer-i-Carbonell & Paul Frijters, 2002. "How important is Methodology for the Estimates of the Determinants of Happiness?," Tinbergen Institute Discussion Papers 02-024/3, Tinbergen Institute.
  3. Dominik Hanglberger, 2011. "Arbeitszufriedenheit im internationalen Vergleich," FFB-Discussionpaper 86, Research Institute on Professions (Forschungsinstitut Freie Berufe (FFB)), LEUPHANA University Lüneburg.
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Cited by:
  1. Dawson, C G, 2014. "Optimism, Job Satisfaction and Self-Employment," Department of Economics Working Papers 39313, University of Bath, Department of Economics.
  2. Lechmann, Daniel S. J., 2013. "Can working conditions explain the return-to-entrepreneurship puzzle?," Discussion Papers 86, Friedrich-Alexander-University Erlangen-Nuremberg, Chair of Labour and Regional Economics.
  3. Nicolai Suppa, 2012. "Job Characteristics and Subjective Well-Being in Australia – A Capability Approach Perspective," Ruhr Economic Papers 0388, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.

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