Life satisfaction and self-employment:A matching approach

Despite lower incomes, the self-employed consistently report higher satisfaction with theirjobs. But are self-employed individuals also happier, more satised with their lives as awhole? High job satisfaction might cause them to neglect other important domains of life,such that the fullling job crowds out other pleasures, leaving the individual on the whole nothappier than others. Moreover, self-employment is often chosen to escape unemployment,not for the associated autonomy that seems to account for the high job satisfaction. Weapply matching estimators that allow us to better take into account the above-mentionedconsiderations and construct an appropriate control group. Using the BHPS data set thatcomprises a large nationally representative sample of the British populace, we nd that in-dividuals who move from regular employment into self-employment experience an increasein life satisfaction (up to two years later), while individuals moving from unemployment toself-employment are not more satised than their counterparts moving from unemploymentto regular employment. We argue that these groups correspond to \opportunity" and \ne-cessity" entrepreneurship, respectively. These ndings are robust with regard to dierentmeasures of subjective well-being as well as choice of matching variables, and also robustnessexercises involving \simulated confounders".