On preferences for being self-employed

Abstract

The concept of procedural utility assumes that agents not only receive utility from outcomes but also attach an independent value to the procedures that lead to these outcomes. This paper analyzes whether the preferences that underlie procedural utility are homogeneous using the case of independence at the workplace. I exploit the event of German reunification to assign preferences for independence to respondents without using data on occupational choice or directly reported procedural preferences. I find that the self-employed report higher job satisfaction than the employed, even after controlling for income and hours worked. However, there is a significant amount of heterogeneity in this effect: while “independent types” experience a large increase in job satisfaction from being self-employed, the most “hierarchical types” could even experience a decrease.