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Are newly self-employed overly optimistic about their future well-being?
JournalArticle (Originalarbeit in einer wissenschaftlichen Zeitschrift)
 
ID 4636226
Author(s) Odermatt, Reto; Powdthavee, Nattavudh; Stutzer, Alois
Author(s) at UniBasel Stutzer, Alois
Year 2021
Title Are newly self-employed overly optimistic about their future well-being?
Journal Journal of Behavioral and Experimental Economics
Volume 95
Pages / Article-Number 101779
Keywords Self-employment, Overoptimism, Life satisfaction, Projection bias, Predicted well-being
Abstract The formation of expectations is considered a fundamental aspect of the decision process when people reason about entering self-employment. We evaluate the accuracy of newly self-employed individuals‚Eurotm predictions of their overall future well-being. Based on individual panel data for Germany, we find that they, on average, are overly optimistic when we compare their predictions right after the status change with their actual life satisfaction five years later. This finding is robust to controlling for any time invariant personality traits like individual optimism. And it also holds for those self-employed individuals who successfully remain in business for at least five years. A possible reason for the biased prediction might be that they underestimate the heavy workload reflected in higher working hours than desired, as well as the decline in leisure satisfaction after the status change.
Publisher Elsevier
ISSN/ISBN 2214-8043 ; 2214-8051
URL https://www.sciencedirect.com/science/article/pii/S2214804321001191
edoc-URL https://edoc.unibas.ch/86144/
Full Text on edoc Available
Digital Object Identifier DOI 10.1016/j.socec.2021.101779
ISI-Number WOS:000722611300001
Document type (ISI) Article
 
   

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