The Economics of Happiness: the Effect of Transition to Self-Еmployment on Life Satisfaction

The research paper addresses the effect of transition to self-employment on individual life satisfaction in Russia. The analysis is based on the RLMS panel data for the years from 2006 to 2018. In order to estimate the causal effect and construct the appropriate control group for the investigation, the Propensity Score Matching is applied. The preliminary analysis for the entire sample of transitioned individuals revealed the positive effect of the transition on life satisfaction. After distinguishing between the ‘pulled’ and ‘pushed’ motivations for entering self-employment, the research offers an insight for the Russian labor market, which has not been previously provided. The results show that the transition to self-employment increases life satisfaction of individuals, who entered the category voluntarily. In relation to people seeking a way to escape unemployment, insignificant relationship has been found. The estimations have been performed on the balanced groups and the findings are robust to change in method of estimation. The research complies with the research of Binder and Coad (2013, 2016) for the UK and Germany.