Optimism, Job Satisfaction and Self-Employment

Using UK data from 1991 to 2008 this paper investigates whether excessive optimism affects individual level self-employed job satisfaction. Within the context of this paper, excessive optimism refers to the inclination to overestimate the probability of good financial outcomes. Evidence is provided that conditional on self-employed performance, optimism is negatively and significantly associated with self-employed job satisfaction, especially satisfaction with pay. Moreover the detrimental effects of optimism on satisfaction are larger in self-employment than in paid-employment. The results indicate that the higher levels of satisfaction obtained by the self-employed do not result from the self-selection of optimists, suggesting previous studies may underestimate the positive effects of self-employment on utility.