THE LEVEL OF HAPPINESS OF SELF-EMPLOYED FOREIGNERS
-A multi-country analysis on self-employed foreigners in Europe-
by
MARIT STEENDAM
m.k.steendam@student.rug.nl student number 2240645
University of Groningen Faculty of Economics and Business
MSc Business Administration
Supervisor: F. Noseleit Co-assessor: H. Zhou
January 2016
1
Abstract
A remarkable current development is the focus on the relevance of people’s happiness in economic analyses. Whereas the relationship between the level of happiness and employment status has been widely investigated, it remains unclear whether such a relationship exist for foreigners. This relationship is relevant considering the fact that a relatively high rate of immigrants become self-employed. Currently Europe is experiencing influxes of immigrants and refugees, which makes a happiness analysis focusing on foreigners even more essential. Since foreigners have different expectations about life we can expect their level of happiness to differ from natives too. Furthermore, the effect of income on happiness is found to be dissimilar between these two groups, which will affect the relationship between happiness and employment status. Using 29 European countries, this research investigates whether there is a relationship between the level of happiness and foreigners who are self-employed.
2
Table of contents
Introduction 3
Theoretical background 6
Differences between happiness and subjective well-being 6 Influence of foreignness on the happiness of self-employed individuals 7 Influence of immigrant generation on the level of happiness 9
Methodology 11
Measures 11
Results 13
Descriptive statistics 13
Main results 13
Discussion and conclusion 16
Implications 17
Limitations and future research 17
References 19
3
Introduction
A remarkable current development is the focus on the relevance of people’s happiness in economic analyses (Crespo & Mesurado, 2015). Rather than solely focusing on economic growth, researchers slowly agree on the importance of subjective well-being rates such as happiness (Naudé, Amerós, & Cristi, 2014; Stiglitz, Sen, & Fitoussi, 2009). For the reason that self-employment is an important source of economic growth (Audretsch & Keilbach, 2004), this paper will focus on self-employment. Research has already shown that in general self-employed individuals gain a higher level of happiness compared to those who are employed (Benz & Frey, 2008; Binder & Coad, 2013; Crum & Chen, 2015). Whereas the gain in happiness for self-employed individuals in general might be clear, the question arises as to what effect self-employment has on the happiness level of individuals who are foreign. Lately, Europe is experiencing influxes of immigrants and refugees. Experiences from the past immigrants show us that a relatively high rate of these immigrants become
self-employed, relative to native workers (Hammarstedt, 2006). What effect self-employment has on the level of happiness of foreigners in Europe will be investigated using data from 29 European countries. Potential causes of similar or dissimilar levels of happiness will be discussed.
Self-employed individuals in general enjoy a higher level of happiness compared to employees. Nonetheless, not much is known about the happiness level of self-employed foreigners. This analysis shows that the term happiness is often used interchangeably with the concept subjective well-being (Frey & Stutzer, 2012). However, there is an importance difference between the two definitions (Diener, 2006). Subjective well-being (SWB) can be divided into two parts, namely evaluative well-being and experienced well-being. Happiness falls into this last category (Stone & Mackie, 2014). Veenhoven’s (1991) definition of happiness is used in this paper; ‘‘the degree to which an individual judges the overall quality of his or her life as favorable’’ (p. 2). The need to include happiness of individuals into economics is increasingly acknowledged in today’s world (Crespo & Mesurado, 2015). The focus of this paper will be on self-employment, as self-employment is a key source for economic growth and competitiveness (Audretsch & Keilbach, 2004;
Audretsch & Thurik, 2001). Happiness economics, which is the description of the focus on the relevance of people’s happiness in economic analyses (Crespo & Mesurado, 2015), has given some insights into employment. Past research has brought to light that self-employed individuals gain a higher level of happiness compared to the individuals who are employees (Benz & Frey, 2008; Binder & Coad, 2013; Crum & Chen, 2015). Whereas the gain in happiness for self-employed individuals in general might be clear, it is not known yet what the level of happiness is for the self-employed individuals who are seen to be more vulnerable. This group of vulnerable self-employed individuals include the self-employed individuals who are on average younger or older, female, disabled and/or foreign.
4 (Algan, Dustmann, Glitz & Manning, 2010).
Not only is the happiness of native inhabitants of value, but also the happiness level of ethnic minorities such as foreigners is of importance. Nettle (2005) suggest, that if
government and economic systems should maximize collective or aggregate happiness, it should be evaluated by its effect in promoting happiness aggregated by all. However, there is very limited literature about the relative position of foreigners in the European countries (Algan et al., 2010). The objective well-being of these foreigners and their descendants might improve, however the impacts on their subjective well-being, which includes happiness, are complex (Stillman, Gibson, McKenzie, & Rohorua, 2015). Even though a large number of researchers have stated that rising incomes do not generally lead to an increase in the
subjective well-being (Bartram 2012; E. Diener, Sandvik, Seidlitz & M. Diener, 1993), most countries would still focus their attention on economic growth, rather than achieving well-being or happiness.
The goal of this study is to refine our current understanding of the level of happiness of self-employed foreigners. One of the reasons to expect a relationship between happiness and self-employed foreigners to exist is because foreigners have more difficulty forming unbiased expectations about their life abroad, which can affect their level of happiness (Senik, 2014). Moreover, the effect of income on happiness is found to be different for natives and foreigners, which might influence their level of happiness as self-employed individual (Bartram, 2011). Lastly, this analysis investigates whether there is a relationship between happiness and self-employed foreigners who are second generation immigrants. It will be investigated whether the level of happiness between first- and second generation immigrants generate divergent outcomes. When individuals have biased expectations based on their own culture, the chance that this individual’s expectations aligns with his or her judgements declines, which in turn negatively influences the level of happiness. This suggest that it is possible that self-employed first generation immigrants have a lower level of happiness compared to the self-employed natives.
5 their needs and interests. Since a nation’s wealth is their people, the most important goal of the nation is about expanding the choices people have to lead the lives that they value (Streeten, 1994). The purpose of the HDI is to show that even though countries might have a high GDP, that countries have to adopt policies that use that economic prosperity for the benefits of its citizens. However, this approach of focusing on happiness of a nation is relatively new (Graham, 2012). Therefore, not only economist can learn from this analysis, but also policy makers who may be inspired by the UN for using happiness as an outcome measure when making policy decisions. This analysis gives those policy makers some information about the relationship between self-employed foreigners and happiness. The importance of adopting policies that use economic prosperity for the benefits of its citizens to attain happiness of all nations inhabitants is highlighted.
6
Theoretical framework
Researchers have not yet investigated whether there exist a gain in happiness for self-employed foreigners compared to foreign employees. Although this link has already been investigated for self-employed individuals in general (Benz & Frey, 2008; Binder & Coad, 2013; Crum & Chen, 2015), the focus on the subgroup of self-employed foreigners is new. The focus on self-employment is for the reason that self-employment is key for achieving sustainable growth. For example, the Europe 2020 strategy recognizes the importance of self-employment, so far that the top priority of the Commission is to help Europe to grow again by increasing the number of jobs without creating debt ("Supporting entrepreneurs," 2015). By focusing on self-employed foreigners the link between happiness and being self-employed might differ from the link which has been found for self-employed individuals in general. This section reviews prior literature on the happiness level of self-employed foreigners.
Differences between happiness and subjective well-being
The distinction between happiness and subjective well-being is fundamental in this research as to make technically correct conclusions. Often, the term happiness is intertwined with the definition subjective being. For instance, Frey and Stutzer (2012) use subjective well-being (SWB) as a scientific term of happiness. A distinction between the two different
concepts happiness and SWB is therefore missing. The term ‘happiness’ is merely used as it is seen to be a more popular term than SWB these days. The distinction between the two
concepts are only made by Frey and Stutzer when it comes to a particular measurement of either concept. However, as Diener (2006) has stated, “subjective well-being is an umbrella term for the different valuations people make regarding their lives, the events happening to them, their bodies and minds, and the circumstances in which they live”. Thus, the conflated usage of SWB and happiness is technically incorrect, as subjective well-being captures more than solely happiness.
7 Now that the definition of subjective well-being has been made clear, the focus can shift towards the definition of happiness. To define ‘happiness’ the definition of Veenhoven’s (19991) study is used: ‘‘the degree to which an individual judges the overall quality of his or her life as favorable’’ (p. 2). It is therefore a measure that indicates how much the person likes the life he or she is leading. Therefore, this measurement could also be called
‘life-satisfaction’. Thus, Happiness is not the cognitive evaluation but solely the experienced well-being. The importance of happiness of the population is acknowledged by many, yet the topic has not received much attention by researchers (Lyubomirsky, Sheldon & Schkade, 2005). A remarkable current development is the focus on the relevance of people’s happiness in economic analyses, which is also called ‘happiness economics’ (Crespo & Mesurado, 2015). The need to focus on the importance of different subjective well-being rates such as happiness into economics is increasingly acknowledged in today’s world (Crespo &
Mesurado, 2015; Naudé, Amerós, & Cristi, 2014; Stiglitz, Sen, & Fitoussi, 2009). This belief that maximizing happiness should be the goal of one’s life goes back to the ancient Greek philosopher Aristippus. Though, most countries would focus their attention on economic growth, rather than achieving well-being. Hume (1970) even assumed that economic growth enhanced happiness. Yet, Richard Easterlin (1974) challenged this view that well-being depended on either absolute or relative income. Easterlin noted that although the individual well-being is positively affected by income within a country at a certain point in time, the average level of well-being in a country changes little over time, even in periods where the average income increased significantly. Even though this paradox has been criticized by several researchers (Frank, 2012; Stevenson & Wolfers, 2008), who are implying that there is of a positive link between well-being to income, most researchers find that rising incomes do not generally lead to an increase in the subjective well-being (Bartram 2012; E. Diener, Sandvik, Seidlitz & M. Diener, 1993).
Influence of foreignness on the happiness of self-employed individuals
Previous research has exclusively measured the happiness levels of self-employed individuals compared to employees. The positive link between happiness and self-employment has become evident (Benz & Frey, 2008; Binder & Coad, 2013; Crum & Chen, 2015). Interesting work and autonomy are found to be valued beyond material outcomes (Benz & Frey, 2008), which makes the average self-employed happier than the average employee.
However, as many countries in Europe have experienced large-scale immigration in the last half of the twentieth century (Algan, Dustmann, Glitz & Manning, 2010), it might be interesting to see whether there is a relationship between happiness and self-employment for individuals who are foreign. Especially during this time, now that Europe is again
experiencing significant influxes of immigrants and refugees (‘Why is the EU
struggling,’2015). Unfortunately, there is very limited literature about the relative position of foreigners in European countries (Algan et al., 2010).
8 the new country which they enter is likely to have another culture which does not match the immigrants culture. The level of happiness of foreigners might be dependent on these cultural habits and believes instead of being dependent on the environment (Senik, 2014). As
explained, happiness is the degree to which an individual judges the overall quality of his or her life as favorable (Veenhoven, 1991). When a person has biased expectations based on their own culture, the chance that this individual’s expectations matches his or her judgement decreases, which in turn decreases the level of happiness (Senik, 2014). This suggest that it is possible that employed foreigners have a lower level of happiness compared to the self-employed natives. This is for the reason that the expectations of foreigners is more likely to vary from the reality than this is the case for the individuals who are not foreign.
Furthermore, income might have a different effect on self-employed foreigners than it has on self-employed individuals who are not foreign. The effect of income on happiness of foreigners compared to natives has been investigated (Bartram 2011; Godfrey & Wolf, 2012). For example, Bartram (2011) finds that the relationship between income and happiness is stronger for foreigners in the USA than for natives. Though, even for foreigners the
relationship between income and happiness is still relatively weak. This confirms our earlier conclusion between economics and happiness, we cannot be clear about a relationship as such.
There does exist some literature about the level of happiness of foreigners compared to that of the natives. A study in the USA by Bartram (2011) sheds light on the fact that
foreigners in the USA, controlling for other variables, report a lower level of happiness than native Americans. Several other researchers have found similar results in non-European countries, all suggesting that the natives have a higher level of happiness than those individuals who are foreign (Slonim-Nevo & Sharaga, 1997). Since none of these former researchers have focused their attention on Europe, it would be interesting to see the results of native and self-employed foreigners happiness within European countries.
Not only do previous findings suggest that a relationship between happiness and self-employment exist (Benz & Frey, 2008; Binder & Coad, 2013; Crum & Chen, 2015). But also, with respect to causes of happiness, both Bartram (2011) and the researchers Godfrey and Wolf (2012) find that foreign and native individuals vary in happiness determinants. These arguments imply that there might be a relationship between happiness and self-employed foreigners. Therefore, the first hypothesis states:
H1 = After controlling for the effects of self-employment and foreignness, the relationship between self-employed foreigners and happiness is expected to be
significantly different from zero.
If hypothesis 1 is supported by the data, it could be that the relationship between
9 more satisfied, relative to other individuals, both before and after becoming self-employed (Schjoedt & Shaver, 2007).
It can also be the case that hypothesis 1 is supported but showing a negative
relationship between self-employed foreigners and happiness, after controlling for the effects of self-employment and foreignness. A possible reason might be that self-employed
foreigners have a different impetus to start a new venture than a self-employed individuals who are not foreign. Self-employed foreigners might have been pushed into survival self-employment due to the disadvantage, such as discrimination, they experienced in the labor market (Toussaint-Comeau, 2012; Wood, Davidson & Fielden, 2012). This might therefore lead to different results for the average level of happiness for self-employed foreigners and employees compared to self-employed individuals who are not foreign.
Influence of immigrant generation on the level of happiness
Not only does foreignness probably influences the happiness of self-employed individuals, as described in previous section. But so does also the immigrants generation have a potential impact on the happiness level of the self-employed individual. It may be the case that second generation immigrants have less difficulties to form unbiased expectations about life in a new and different country compared to first generation immigrants, which on its turn might lead to a higher level of happiness (Senik, 2014). Consequently, immigrants assimilation with the host country’s culture might thus mean an increase of their level of happiness (Angelini, Casi & Corazzini, 2013). Furthermore, the study by Senik (2014) shows that the level of happiness of second generation immigrants tends to converge towards that of the natives. Likewise, second generation migrants seem to be able to adjust to a new country better than first
generation migrants can do this (Fuligni, 1998). It is possible that second generation migrants can therefore more easily form unbiased expectations about their life.
Previous literature has mentioned that that a relationship between happiness and self-employment exists (Benz & Frey, 2008; Binder & Coad, 2013; Crum & Chen, 2015). Moreover, first and second generation immigrants differ in their expectations about life (Senik, 2014), which may lead to variations in the immigrants levels of happiness (Angelini, Casi & Corazzini, 2013). Based on the assumption that first and second generation
immigrants differ in their level of happiness, the second hypothesis is derived:
H2 = The level of happiness of self-employed individuals who are second generation immigrants is expected to be significantly different from the level of happiness of self-employed foreigners.
10 not only including the support from the family, but also the instrumental support from the population and associations such as the government. Support from government can be in many forms, an example is frequent informational support. If social support indeed is a factor which increases the level of happiness of immigrants, policy makers might look into ways of increasing their support towards self-employed immigrants. Possibly these policy decisions speed up the process of integration for the self-employed foreigners, which then leads to an increase in their happiness.
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Methodology
For this analysis the cross national survey ‘the European Social Survey’ (ESS) is used, which was undertaken in various years. The data of round 6, which was held in year 2012, is selected as this is the latest round that includes all variables needed for this research. The ESS provides high quality comparative data on attitudes, beliefs and behavior patterns of a variety of populations in Europe. One of its core themes is ‘Subjective well-being, social exclusion, religion, national and ethnic identity’. Before using archival data, like any kind of data, validity and reliability issues need to be evaluated.
Golder and Tellis (1993) show that archival data must meet several criteria to ensure validity. These points of criteria are: competence, neutrality, reliability, corroboration and contemporaneity. Firstly, the competence criterion is satisfied because well-known sources, which are assessed using the Survey Quality Predictor, are employed by the informants in order to report correctly. Secondly, the neutrality/objectivity criterion is met since neutral informants have carried out the research. Moreover, the ESS investigated methodological issues concerning survey data quality across national context. By using experiments applied across countries the ESS has focused on measurement equivalence in a cross-national context. Thirdly, the reliability is satisfied because the sources are all reputable. Fourth, the
corroboration criterion is met as confirmatory evidence is found from a similar source. For example, Senik (2014) measured ‘happiness’ using the same question: ‘Taking all things together, how happy would you say you are?’. The possible answers range from 0 (extremely unhappy) to 10 (extremely happy). Lastly, the contemporaneity criterion is met as the
respondents have all filled in the questionnaire in the same period of time. Therefore, validity and reliability are ensured according to the criteria described by Golder and Tellis.
The data used in this research contains all participants of the ESS from the European countries that participated in the ESS sixth round. This leaves us with the following 29 countries, i.e. Albania, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Hungary, Iceland, Ireland, Israel, Italy, Kosovo, Lithuania, Netherlands, Norway, Poland, Portugal, Russian Federation, Slovakia, Slovenia, Spain, Sweden, Switzerland, Ukraine and the United Kingdom. The observations range from 752 (Iceland) to 2.958 (Germany). From these observations, all respondents who declare that they are neither self-employed or employed are filtered out. This leaves us to an average of about 1.886 respondents per country. Observations of self-employed individuals per country can be found in Table 1 in the Appendix. As can be seen in Table 1; a total of 5240 self-employed individuals, of which 477 foreign, are included in the dataset.
Measures
In this analysis the dependent variable ‘happiness’, is as described above, measured on a 10 point Likert scale. As there are a large amount of variables that influence happiness, this paper will control for the variables that seem to have the biggest influence on the level of happiness. These variables are: age, gender, marital status, parenthood, education and ethnic
discrimination. Evaluation of the importance of each of these variables is based on previous literature, and their effect will be discussed shortly.
12 that women appear to be generally happier than men (Wood, Rhodes & Whelan, 1989; Zweig, 2014). These results are the same when we compare the happiness of self-employed females with self-employed males (Clark, 2014; Crum & Yi, 2015; Slade, 2014). Hartog and
Oosterbeek (1997) call this outcome a miracle, explaining that compared to men, women are less wealthy and equally healthy but they are still found to be happier. Furthermore, age has an effect on happiness; the most well-known relationship between age and happiness is the U-shaped hypothesis which posits a curvilinear shape resulting from a dip during midlife
(Blanchflower & Oswald, 2008; Glen, 2009). Additionally, a number of studies have provided evidence that partnership (besides including married couples also including cohabiting
couples) positively affects happiness (Evans & Kelley, 2004; Forooshany, Yazdkhasti, Hajataghaie & Esfahani 2014; Kim & McKenry, 2002). Moreover, the relationship between parenthood and happiness has received an increasing amount of attention. However, results of these various researchers are mixed. On the one hand, researchers have found evidence that parenthood is associated with higher happiness (Ballas & Dorling 2007; Herbst & Ifcher, 2013). On the other hand, other researchers have suggested the reverse (Evenson & Simon, 2005; McLanahan & Adams, 1987). Not only do these outcomes differ, Andersson, Glass and Simon (2014) also mention the variable effects of parenthood on happiness within and across international datasets. Education is another variable that has an effect on happiness, various researchers have found a positive effect of education on happiness (Hayward, Pannozzo & Colman, 2005; Michalos, 2008). Though Noddings (2003) describes the ambiguity of this relationship between education and happiness in his book, this paper will not go into further detail on this control variable here. Lastly, discrimination of foreigners in their host country exists, especially in the labor market integration (Altonj & Blank, 1999). Discrimination is definitely a determinant of happiness, which is dependent on the origin of the foreigner. Therefore discrimination has to be taken into account in the empirical analysis (Senik, 2014). By taking in consideration the above described variables, it is possible to see the impact of the country of birth and the employment relation on an individual. Therefore, the regression model is as following:
Hi = α + β1Gender + β2Age + β3MaritalStatus + β4Parenthood + β5Education + β7Discrimination +
β8BornInCountry + β9Employment + εi
The linear regression will also show which variables in the model explain the variation in the dependent variable ‘happiness’ (adjusted R2
13
Results
Descriptive statistics
Descriptive statistics of the data can be found in Table 1, which can be found in the Appendix. The table shows that a total of 5240 self-employed individuals, of which 477 foreign, participate in this research. In the data the countries Israel, Ireland, Germany, Poland and Portugal have the highest number of self-employed individuals. Of which Israel has the highest percentage of self-employed foreigners (22,9%) followed by Ireland (8,4%) and The United Kingdom (8,2%).
Main results
When running a regression analyses the impact of each control variables on happiness becomes apparent, showing results that are in line with the classical findings of the happiness literature in terms of gender (0 = Male, 1 = Female) , age, partnership (0 = No, 1 = Yes) ,
parenthood (0 = No, 1 = Yes), education and discrimination (0 = No, 1 = Yes). As these factors
influence happiness, they need to be controlled for in our analysis to see the effect on country of birth and employment relation on the level of happiness. Table 2 shows the coefficients of each control variable. From the results we can see that females are
significantly happier than their counterpart. Furthermore, age seems to have a negative value on the level of happiness at a decreasing rate, in Table 3 in the Appendix , it can be seen that the βeta for age is negative and the βeta for age squared is positive. It can be the case that age start to increase at a certain point in time, but this is not before the age of 80 in this dataset. Therefore, a u-shape might exist, but is not relevant for this research as most self-employed in this data are aged below 80 years. Moreover, partnership has indeed proven to have a positive influence on happiness, this research shows that people with a partner are significantly happier than people without a partner. As expected, parenthood has an influence on the level of happiness. Results show that people without children are
significantly happier than those with children. Furthermore, the level of education measured in years has a significant positive effect on happiness. Lastly, people undergoing ethnic discrimination are significantly less happy than those people who do not experience discrimination.
Table 2 The impact of each variable on the level of happiness
14 Education 0.049*** (0.003) 0.048*** (0.003) 0.048*** (0.003) 0.048*** (0.003) 0.048*** (0.003) Discrimination -1.001*** (0.139) -1.031*** (0.139) -1.030*** (0.139) -1.058*** (0.140) -1.057*** (0.140) Self-employment - 0.350*** (0.041) 0.358*** (0.042) 0.358*** (0.042) 0.355*** (0.043) Foreign - 0.158*** (0.043) 0.168*** (0.045) -0.001 (0.066) 0.006 (0.0068) Self-employment*Foreign - - -0.106 (0.149) -0.116 (0.149) -0.199 (0.230)
Second generation immigrant - - - 0.216***
(0.062) 0.207*** (0.065) Self-employment*Second generation immigrant - - - - 0.101 (0.213) Note: GLS regression, standard errors in parentheses. ***, **, * indicate significance at 1, 5, or 10 %, respectively
Not only describes Table 2 the effects of the control variables, it also shows that the two main variables of interest namely: country of birth, which is in this research labelled as ‘Foreign’ (0 = No, 1 = Yes) and employment relation, labelled as ‘Self-employed’ (0 = No, 1 = Yes) both have a
significant influence on happiness. That these two variables significantly add to the explained variation of can be seen in Table 4 in the Appendix, which shows that the adjusted R2 has raised from 0,055 to 0,057. The positive relationship between self-employed and happiness is significant, which corresponds to existing research. The positive coefficient for country of birth suggests that people who are born in a foreign country but live in the country
investigated, are significantly happier than those who are born in the country of interest. However, the coefficient is significantly smaller than the coefficient for the effect of
employment relation on the level of change in happiness. This suggests that the relationship between an individual his or her country of birth on happiness is less pronounced than the relationship between employment and happiness. Such an outcome is not such a surprise as the effect of employment relation on happiness is well-known and therefore a much
researched relationship. Where the relationship of country of birth and happiness is not as recognized, there does seem to exist a relation between these two variables.
To test Hypothesis 1, the effects of both self-employment and foreignness on happiness will be tested. As can be seen in Table 2, model II, both self-employment and foreignness have a significantly positive relationship on happiness. Though, the relationship between foreign self-employed and happiness is not found to be significant as can be seen in Table 2, model III, where ‘Self-employment*Foreign’ is not significant. This non-significant outcome will be discussed further on in this research.
15 immigrants. The relationship between the self-employed second generation immigrants and happiness, hypothesis 2, is found to be insignificant. Model V, in Table 2, shows this positive but insignificant result. In the same way as the results of hypothesis 1, the outcome of the second hypothesis will be discussed later on.
16
Discussion and conclusions
The relationship between the level of happiness of self-employed foreigners compared to foreign employees, self-employed individuals who are not foreign and different generations of self-employed immigrants is investigated.
The analysis reveals that self-employed individuals in general enjoy a higher level of happiness compared to employees, which correspond to the results that have been found in the past (Benz & Frey, 2008; Binder & Coad, 2013; Crum & Chen, 2015). The main reason for this finding is that self-employed individuals value interesting work and autonomy beyond material outcomes. Thereafter, the relationship between foreignness and happiness has been investigated. This research found that foreigners in general are happier than their native counterparts. Contrary to these findings, Bartram (2011) and Slonim-Nevo and Sharaga (1997) have suggested that natives have a higher level of happiness than foreigners. Surprising is the difference between this research and those past findings. Therefore, it is interesting to shed light on possible reasons that explain this variance. The most striking difference is the use of control variables. Both Bartram and the researchers Slonim-Nevo and Sharaga have failed to include the interaction effect of discrimination in their research. This multi-country analysis does include the interaction effect of discrimination as this variable is a determinant of happiness which is dependent on the origin of the foreigner. Therefore, the negative effect that foreigners seem to have from the immigration according to Bartram and the researchers Slonim-Nevo and Sharaga should be interpreted with care.
Even though both self-employment and foreignness seem to have a positive effect on happiness; this analysis found an insignificant outcome on the relationship between self-employed foreigners and happiness after controlling for various factors such as age and gender. The reason for this insignificant result is likely to be caused by the lack of
respondents with the needed characteristics such as being foreign and self-employed. Even though this research fails to show a connection between self-employed foreigners and
happiness, there may exist a relationship as such. An relationship between these two variables is expected due to previous findings on this topic. Research clearly describes the difficulty foreigners have in forming unbiased expectations when it comes to living abroad (Senik, 2014). Since the happiness level of individuals who are foreign is likely to be dependent on these cultural expectations, self-employed foreigners might not experience the same
relationship between self-employment and happiness as their native counterparts do.
17 This finding is in line with previous research on different countries (Angelini, Casi &
Corazzini, 2013; Senik, 2014). That second generation self-employed immigrants are on average happier than the first generation self-employed immigrants, can be for the reason that second generation self-employed immigrants have less difficulties to form unbiased
expectations about live in the country they live in.
However, the results of testing the relationship between second generation self-employed immigrants and happiness are insignificant. Again, the reason for this outcome is very likely to be caused by the small amount of second generation self-employed foreigners available in the dataset. Unfortunately, the relationship between self-employed individuals who are second generation immigrants and happiness cannot be proven according to the analysis in this paper. However, second generation immigrants seem to be able to adjust to a new country better than first generation immigrants can do this (Fuligni, 1998). Moreover, unbiased expectations often lead to higher levels of happiness (Senik, 2014). Therefore, it is possible that second generation immigrants are more able to form unbiased expectations about their life than their first generation counterpart. This in turn is likely to lead to an increased level of happiness for second generation immigrants.
Implications
This analysis is important from a theoretical perspective, since it establishes the relationship between self-employment and happiness for the foreigners in European countries, which has not been investigated up to this point in time. This is accomplished by using a multi-country analysis, using 29 European countries, as to increase generalizability of the results. One specific difference in this research compared to those within the same subject is the clear distinction made between subjective well-being and happiness. Hereby, happiness is defined in a technically correct way.
Besides the theoretical implications, this research has some important implications for both economists and policy makers. First, this paper is interesting to economists because institutional conditions such as the quality of the government has an effect on people’s happiness (Frey & Stutzer, 2002). The effects that flow directly from the quality of
institutions are often larger than the effects that flow through economic growth (Helliwell, 2001). Hence, the importance that institutions such as the government can have on the happiness of its nation is relatively large and should therefore not be overlooked. Secondly, it is of great relevance that policy makers get to know more about the possibility of including happiness as an outcome measure. Happiness metrics should be used more regularly as an indicator to help measure the well-being of a nation as it measures what is seen as the ultimate goal of people’s life (Frey & Stutzer, 2002). The United Nations has already developed the Human Development Index (HDI) which takes the emphasis off economic growth and focuses instead on human physical and educational well-being. Furthermore, the UN urges that countries have to adopt policies that use that economic prosperity for the benefits of its citizens (Hou, Walsh & Zhang, 2015). Since a nation’s wealth is their people, the most important goal of the nation is expanding the choices people have to lead the lives that they value (Streeten, 1994). Despite the importance of including happiness metrics in policy making, it is a relatively new approach (Graham, 2012).
18 start to use happiness as an outcome measure.
Thirdly, since second generation immigrants seem to be happier than first generation immigrants policy makers now know that individuals who are in the born in the country, but have foreign parents, are on average happier than those individuals who are born abroad. A possible reason for this capability of second generation immigrants might be that they have received help such as social support from their environment. Social support mentioned by Bak-Klimek, Karatzias, Elliott and Maclean (2015) as an important source of immigrant’s happiness. Institutions could help immigrants by providing some social support needed to help them adjust to their country. The result in this analysis, which shows the difference in happiness for first and second generation immigrants, will make the policy maker realize that sometimes specific targeting is needed. This means that if policy makers are trying to help immigrants in their integration process, they might want to focus on the first generation immigrants, seen the fact that they are in general found to be less happy than their second generation counterparts.
Limitations and future research
This study has several limitations that could benefit from further research. Firstly, this study found insignificant results for the two hypotheses. The reason for this outcome is that the number of self-employed foreigners in this dataset is relatively small. Therefore, the
promising results and expectations given in this research could be established through a wider investigation. The use of a larger dataset is likely to lead to significant outcomes, which will then give even more information about the level of happiness of self-employed immigrants. Secondly, unlike Slonim-Nevo and Sharaga (1997) and Bartram (2011) future research on self-employed foreigners, or foreigners in general should control for the negative effect of discrimination on immigration. Thirdly, the direction of the causal relationship between self-employment and happiness should be tested. This in order to be sure that the direction of causality is not the other way around, which is: happiness leading to make a person choose to start up a new venture (Bradley & Roberts, 2004; Schjoedt & Shaver, 2007). Fourth, future research should investigate the factors that cause the gap between the level of happiness of self-employed individuals who are first and second generation immigrants. This as to find out the cause of this gap in happiness. It might be the case that the gap is due to a factor which can be improved with the cooperation of policy makers such as social support. Lastly, should the government and economic systems maximize happiness of all, the difficulty of measuring the effect of a decision or policy on the total happiness becomes clear.
19
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23
Appendix
Table 1 – Descriptive data
Country Frequency
self-employed
Percentage Frequency
self-employed foreigners Percentage Albania 130 2,5 - - Belgium 216 4,1 23 4,8 Bulgaria 149 2,8 - - Switzerland 160 3,1 26 5,5 Cyprus 153 2,9 19 4,0 Czech Republic 190 3,6 10 2,1 Germany 298 5,7 17 3,6 Denmark 142 2,7 8 1,7 Estonia 147 2,8 18 3,8 Spain 239 4,6 27 5,7 Finland 244 4,7 6 1,3 France 186 3,5 13 2,7 United Kingdom 279 5,3 39 8,2 Hungary 109 2,1 1 0,2 Ireland 318 6,1 40 8,4 Israel 346 6,6 109 22,9 Iceland 97 1,9 4 0,8 Italy 151 2,9 13 2,7 Lithuania 94 1,8 1 0,2 Netherlands 202 3,9 19 4,0 Norway 125 2,4 10 2,1 Poland 296 5,6 4 0,8 Portugal 284 5,4 18 3,8 Russian Federation 115 2,2 7 1,5 Sweden 189 3,6 28 5,9 Slovenia 94 1,8 6 1,3 Slovakia 158 3,0 4 0,8 Ukraine 70 1,3 6 1,3 Kosovo 59 1,1 1 0,2 Total 5240 100,0* 477 100,0*
*The numbers might not add up to 100% due to rounding
Table 3 – Control variable ‘Age’, coefficients
Variable -Unstandardized Coefficients- B (Std. Error) Constant 7.715*** (0.025) Age -0.012*** (0.000) Constant 8.350*** (0.058) Age -0.043*** (0.003) Age2 0.000*** (0.000)
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Table 4 – Explained variation of the variables
Model Adjusted R2 Adjusted R2 change Sig. F change
1 0.055 0.055 0.000
2 0.057 0.002 0.000
3 0.057 0.000 0.475
4 0.058 0.001 0.000
