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Does self-employment contribute to national happiness?

  • Harbi, Sana El
  • Grolleau, Gilles

Recent studies showed that self-employment impacts individual happiness either positively or negatively. Rather than considering the happiness effects at the individual level, we assess whether self-employment effects spread and impact the domestic happiness beyond the involved individuals. We distinguish a direct effect of self-employment on life satisfaction and an indirect effect through the impact of self-employment on per capita income and the subsequent impact of income on life satisfaction. Using panel data analysis for 15 OECD countries over a period of 18 years, we investigate empirically whether countries with higher levels of self-employment are happier, by disentangling the two previously mentioned effects. We remedy the potential endogeneity problem when estimating the indirect effect by instrumenting the self-employment rate. The main finding is a significant and negative direct effect which is larger in magnitude than the indirect effect, resulting in an overall negative effect of self-employment on the domestic happiness.

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Article provided by Elsevier in its journal Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics).

Volume (Year): 41 (2012)
Issue (Month): 5 ()
Pages: 670-676

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Handle: RePEc:eee:soceco:v:41:y:2012:i:5:p:670-676
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