Does family involvement increase the subjective well-being of the self-employed? Evidence from China

ABSTRACT

Using data from the China Household Finance Survey, we investigate the relationship between family involvement and the subjective well-being (SWB) of the self-employed. Instrumental variables are used to address the potential endogeneity of family involvement. We show that family involvement has a significant effect on SWB and that the effect varies depending on whether the self-employed hire employees. When there are no employees, the effect is significantly positive; when employees are present, the effect is significantly negative. Specifically, self-employed individuals who have family involvement but no employees significantly have the higher levels of SWB than all the other self-employed individuals. Mechanism analysis shows that family involvement affects the SWB of the self-employed through an increase in business income. Robustness checks, including an extended ordered probit regression model and an estimation using an alternative measure of family involvement, validate our findings. Our analysis implies that family labour is an effective source of human resources for self-employed individuals in China, especially those without employees.

KEYWORDS:

• Self-employed
• subjective well-being
• family involvement
• employee
• China

JEL CLASSIFICATION:

• D19
• D69
• J23

Disclosure of potential conflicts of interest

No potential conflict of interest was reported by the author(s).

Notes

¹ In China, private enterprise refers to a for-profit economic organization that is invested and established by a natural person or held by a natural person and is based on wage labour, including private limited liability companies, private companies limited by shares, private partnerships and private solo proprietorship enterprises. The main characteristics of individual-run businesses are individuals or families engaged in production and business activities.

² The samples in 2015 and 2017 both covered 29 provinces (excluding Xinjiang and Tibet). The total sample in 2015 included 37,289 households from within 1,396 communities and villages in 351 counties. The total sample in 2017 included 40,011 households from within 1,428 communities and villages in 355 counties.

³ Some freelancers and homeworkers can be viewed as somewhere between wage employment and self-employment (Boeri et al. 2020), where ‘freelancer’ is defined by the CHFS as someone not employed by an organization or an individual, and includes, for example, painters, freelance writers, independent actors and singers. Some researchers classify self-employed individuals, including those who employ others, as self-employed, but exclude gig workers and floating vendors.

⁴ Besides the supporting literature on SWB, several psychological researchers propose that attitude is also a persistent response tendency (Taylor, Peplau, and Sears 2006). People try to maintain consistency in the cognitive processes constituting their attitude, as otherwise cognitive dissonance will occur and lead to psychological stress and negative emotions (Von Hecker 1993; Harmon-Jones 2000). This makes people resistant to changes in their attitude. Likewise, as an overall evaluation of one’s life, SWB is formed through a long-term process and cannot be changed easily.

⁵ The CHFS mentions ‘What is the form of the business?’, with options including ‘Company limited’, ‘Limited liability company’, ‘Partnership’, ‘Wholly-owned enterprises’, ‘Individual or private business’ and ‘Business without formal form’. Among them, the last two are informal businesses and the others are formal businesses (Xu et al. 2019).

⁶ The marginal effects of family involvement on the responses ‘not happy at all,’ ‘not happy,’ ‘so-so,’ ‘happy’ and ‘very happy’ are −0.002, −0.008, −0.031, 0.011 and 0.030, respectively, and are significant at the 1% significance level, indicating that family involvement can significantly reduce the probability of the self-employed feeling unhappy and increase the probability of happiness.

⁷ The marginal effect of family involvement on SWB is 0.053 and significant at the 1% significance level.

Additional information

Funding

This work was supported by Philosophy and Social Science Planning Project of Guangdong Province [GD20CYJ09]..