The Happy Farmer: Self-Employment and Subjective Well-Being in Rural Vietnam

Using a unique survey data set this paper documents a positive effect of self-employment in farming on subjective well-being. This direct effect is only partly offset by negative, indirect effects working through income and other variables. These findings are interpreted as effects of self-employment in farming on perceived autonomy, competence and relatedness. The results suggest that economic transformation is associated with a psychological cost, which may contribute to explaining earnings gaps between sectors and types of employment. We also investigate other determinants of happiness, and for example find strong positive effects of own income and strong negative effects of neighbors’ income, suggesting the importance of relative rather than absolute levels of income.