Becoming self-employed from inactivity: An in-depth analysis of job satisfaction

Abstract

Inactive individuals represent a large pool of potential labour force whose activation entails economic and social advantages. However, they are a heterogeneous group of people who face different barriers to enter paid employment. Self-employment may be an attractive alternative for them, because its nonpecuniary aspects might adapt better to their necessities. Using data from the European Community Household Panel, we applied propensity score matching techniques to estimate the causal effects of transitions to self-employment on the job satisfaction –with pecuniary and nonpecuniary aspects– of previously inactive people. We further perform separate analyses for students, homemakers, and retirees to account for heterogeneity. Our results show that, although self-employment generally brings higher satisfaction than remaining inactive, the effects of self- employment on job satisfaction compared to paid employment varies across subgroups. This suggests that their motivations to become self-employed are diff...