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Entrepreneurship from Scratch: Lessons on the Entry Decision into Self-Employment from Transition Economies

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Author Info

  • Earle, John S.

    ()
    (George Mason University)

  • Sakova, Zuzana

    (affiliation not available)

Abstract

This paper exploits the rapid rise in self-employment rates in post-communist Eastern Europe as a valuable "quasi-experiment" for understanding the sources of entrepreneurship. A relative demand-supply model and an individual sectoral choice model are used to analyze a 1993 survey of 27,000 adults in six transition economies. Estimated self-employment earnings premia are positive, and the data imply positive selection into both employee and self-employment status. Structural probit estimates show the probability of self-employment entry is unassociated with former Communist Party affiliation but positively related to schooling, pre-transition family income, receipt of property in restitution, pre-communist family business-holding, and predicted earnings differential. Cross-country variation in predicted self-employment entry rates and relative earnings provide evidence on the demand and supply factors affecting the decision to become an entrepreneur.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 79.

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Length: 48 pages
Date of creation: Dec 1999
Date of revision:
Handle: RePEc:iza:izadps:dp79

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Keywords: Entrepreneurship; self-employment; transition; small business; selection bias; structural probit Eastern Europe; Bulgaria; Czech Republic; Hungary; Poland; Russia; Slovakia;

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References

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Citations

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Cited by:
  1. Klara Z. Sabirianova, 2000. "The Great Human Capital Reallocation: An Empirical Analysis of Occupational Mobility in Transitional Russia," William Davidson Institute Working Papers Series 309, William Davidson Institute at the University of Michigan.
  2. Ira N. Gang & Catherine Y. Co & Myeong-Su Yun, 2002. "Self-Employment and Wage Earning: Hungary During Transition," Departmental Working Papers, Rutgers University, Department of Economics 200219, Rutgers University, Department of Economics.
  3. Daniel Berkowitz & David N. DeJong, 2005. "Entrepreneurship and Post-socialist Growth," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 67(1), pages 25-46, 02.
  4. Scharle, Ágota, 2000. "Önfoglalkoztatás, munkanélküliség és családi kisvállalkozások Magyarországon
    [Self-employment, unemployment and small family firms in Hungary]
    ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(3), pages 250-274.
  5. John McMillan & Christopher Woodruff, 2002. "The Central Role of Entrepreneurs in Transition Economies," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 16(3), pages 153-170, Summer.
  6. Steven Stillman, 2000. "Labor Market Uncertainty and Private Sector Labor Supply in Russia," Working Papers, RAND Corporation Publications Department 00-16, RAND Corporation Publications Department.
  7. Brixiova, Zuzana & Li, Wenli & Yousef, Tarik, 2009. "Skill shortages and labor market outcomes in Central Europe," Economic Systems, Elsevier, Elsevier, vol. 33(1), pages 45-59, March.
  8. Desai, Sameeksha, 2009. "Measuring Entrepreneurship in Developing Countries," Working Paper Series, World Institute for Development Economic Research (UNU-WIDER) UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  9. Guariglia, Alessandra & Kim, Byung-Yeon, 2001. "The Dynamics of Moonlighting: What is happening in the Russian informal economy?," BOFIT Discussion Papers, Bank of Finland, Institute for Economies in Transition 5/2001, Bank of Finland, Institute for Economies in Transition.
  10. Yemtsov, Ruslan, 2003. "Quo Vadis? Inequality and Poverty Dynamics across Russian Regions," Working Paper Series, World Institute for Development Economic Research (UNU-WIDER) UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  11. World Bank, 2001. "Croatia : Economic Vulnerability and Welfare Study," World Bank Other Operational Studies 15698, The World Bank.

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