The psychological strain of becoming self-employed: a longitudinal investigation of honeymoon-hangover effects

Using British longitudinal data, we re-examine the honeymoon-hangover hypothesis (Boswell et al., 2005) for the psychological strain (measured by anxiety and depression) employees experience when they become self-employed. Most previous studies explore self-employment honeymoon-hangover effects mostly for job or life satisfaction. Employing the entropy balancing approach, we find that employees who make the transition to self-employment experience an immediate improvement in anxiety and depression, like that experienced by those who change employers. Our results hint at a slightly stronger initial improvement of psychological strain for those switching employers compared to those entering self-employment. However, within-individual variation analysis of psychological strain supports the honeymoon-hangover hypothesis in that any early anxiety and depression improvements taper off over time. Practical and theoretical implications are discussed.