On the Link between Self-Employment and Job Satisfaction: What Do Really Change after Becoming a Self-Employee?

This paper studies the impact of the transition from salaried employment to self-employment on job satisfaction. Our analysis differs from previous empirical work in three crucial aspects. First, we consider all types of job-to-job transitions, which allow us to eliminate the pure mobility impact from the pure self-employment impact. Second, we consider not only overall job satisfaction but also satisfaction in a wide variety of job domains. Third, we study the interaction between previous unemployment spells and self-assessed skill mismatch with job transitions in their impact on job satisfaction. To do so, we use the European Community Household Panel covering the period from 1994 to 2001. Our data enable us to compare the same individuals before and after job transitions. Our findings indicate that individuals who transit from salaried employment to self-employment increase their job satisfaction more than workers who carry out other types of job transitions. Furthermore, we find that individuals who experience an unemployment spell or declare themselves to be skill mismatched just before the transition experience a higher increase in job satisfaction after the transition. Keywords: Self-employment, unemployment, skill-mismatch, job satisfaction. JEL Classification: L26, J24, B23