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Abstract

The 40 years of socialist regime in East Germany were characterized by a massive anti-entrepreneurship policy. We investigate the reemergence of entrepreneurship in East Germany during its transformation to a market economy following the collapse of the East German state in 1989. It took about 15 years until self-employment levels in East Germany reached those of West Germany. Despite this catch up, we find a number of peculiarities in East German self-employment that appear to be a continuing legacy of the socialist period. In particular, older and better-educated East Germans have a relatively low propensity for starting an own business. Moreover, East German workers tend to have a lower variety of skills than their West German counterparts, which could explain a lower propensity for start up in the early years after reunification. Despite this socialist imprint, we also find considerable continuity in the levels of self-employment in the 1920s and those after transition to a market economy, suggesting the existence of a long-lasting regional entrepreneurship culture.

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Bibliographic Info

Paper provided by Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics in its series Jena Economic Research Papers with number 2012-042.

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Date of creation: 16 Jul 2012
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Handle: RePEc:jrp:jrpwrp:2012-042

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Related research

Keywords: Entrepreneurship; self-employment; new business formation; transformation; East Germany;

Find related papers by JEL classification:

• L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
• O11 - Economic Development, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

This paper has been announced in the following NEP Reports:

• NEP-ALL-2012-07-23 (All new papers)
• NEP-ENT-2012-07-23 (Entrepreneurship)
• NEP-HIS-2012-07-23 (Business, Economic & Financial History)
• NEP-SBM-2012-07-23 (Small Business Management)
• NEP-TRA-2012-07-23 (Transition Economics)

References

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1. Niels Bosma & Ingrid Verheul & Jolanda Hessels & Mirjam van Praag & Veronique Schutjens, 2011. "Entrepreneurship and Role Models," Scales Research Reports H201017, EIM Business and Policy Research.
   
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2. Edward J. Bird & Johannes Schwarze & Gert Wagner, 1994. "Wage effects of the move toward free markets in East Germany," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 47(3), pages 390-400, April.
3. Michael Fritsch & Alexander S. Kritikos & Alina Rusakova, 2012. "Who Starts a Business and Who Is Self-Employed in Germany," Discussion Papers of DIW Berlin 1184, DIW Berlin, German Institute for Economic Research.
   
   • Michael Fritsch & Alexander Kritikos & Alina Rusakova, 2012. "Who Starts a Business and who is Self-Employed in Germany," Jena Economic Research Papers 2012-001, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
   • Fritsch, Michael & Kritikos, Alexander S. & Rusakova, Alina, 2012. "Who Starts a Business and Who is Self-Employed in Germany," IZA Discussion Papers 6326, Institute for the Study of Labor (IZA).
4. Audretsch, David B & Keilbach, Max, 2003. "Entrepreneurship Capital and Economic Performance," CEPR Discussion Papers 3678, C.E.P.R. Discussion Papers.
   
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   • David B. Audretsch & Max Keilbach, 2004. "Entrepreneurship Capital and Economic Performance," Papers on Entrepreneurship, Growth and Public Policy 2004-01, Max Planck Institute of Economics, Entrepreneurship, Growth and Public Policy Group.
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   • Michael Wyrwich, 2010. "Regional Entrepreneurial Heritage in a Socialist and a Post-Socialist Economy," DRUID Working Papers 10-20, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
6. Elisabeth Bublitz & Florian Noseleit, 2011. "The Skill Balancing Act: Determinants of and Returns to Balanced Skills," Jena Economic Research Papers 2011-025, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
7. David Audretsch & Michael Fritsch, 2002. "Growth Regimes over Time and Space," Regional Studies, Taylor and Francis Journals, vol. 36(2), pages 113-124.
8. Caliendo, Marco & Kritikos, Alexander S., 2007. "Start-Ups by the Unemployed: Characteristics, Survival and Direct Employment Effects," IZA Discussion Papers 3220, Institute for the Study of Labor (IZA).
   
   • Marco Caliendo & Alexander Kritikos, 2010. "Start-ups by the unemployed: characteristics, survival and direct employment effects," Small Business Economics, Springer, vol. 35(1), pages 71-92, July.
   • Marco Caliendo & Alexander S. Kritikos, 2008. "Start-Ups by the Unemployed: Characteristics, Survival and Direct Employment Effects," Working Papers 008, Hanseatic University, Germany, Department of Economics.
9. Minniti, Maria, 2005. "Entrepreneurship and network externalities," Journal of Economic Behavior & Organization, Elsevier, vol. 57(1), pages 1-27, May.
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11. Michael Fritsch & Alina Rusakova, 2012. "Self-Employment after Socialism: Intergenerational Links, Entrepreneurial Values, and Human Capital," Jena Economic Research Papers 2012-022, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
    
    • Michael Fritsch & Alina Rusakova, 2012. "Self-Employment after Socialism: Intergenerational Links, Entrepreneurial Values, and Human Capital," SOEPpapers on Multidisciplinary Panel Data Research 456, DIW Berlin, The German Socio-Economic Panel (SOEP).
12. Fritsch, Michael, 2004. "Entrepreneurship, entry and performance of new business compared in two growth regimes: East and West Germany," Freiberg Working Papers 2004,09, TU Bergakademie Freiberg, Faculty of Economics and Business Administration.
    
    • Michael Fritsch, 2004. "Entrepreneurship, entry and performance of new business compared in two growth regimes: East and West Germany," Journal of Evolutionary Economics, Springer, vol. 14(5), pages 525-542, December.
    • Michael Fritsch, 2004. "Entrepreneurship, Entry and Performance of New Businesses Compared in two Growth Regimes: East and West Germany," Papers on Entrepreneurship, Growth and Public Policy 2004-41, Max Planck Institute of Economics, Entrepreneurship, Growth and Public Policy Group.
13. P. Mueller, 2006. "Entrepreneurship in the Region: Breeding Ground for Nascent Entrepreneurs?," Small Business Economics, Springer, vol. 27(1), pages 41-58, August.
14. Wagner, Joachim, 2004. "Are Young and Small Firms Hothouses for Nascent Entrepreneurs? Evidence from German Micro Data," IZA Discussion Papers 989, Institute for the Study of Labor (IZA).
15. Michael Wyrwich, 2012. "Regional Entrepreneurial Heritage in a Socialist and a Postsocialist Economy," Economic Geography, Clark University, vol. 88(4), pages 423-445, October.
    
    • Michael Wyrwich, 2010. "Regional Entrepreneurial Heritage in a Socialist and a Post-Socialist Economy," DRUID Working Papers 10-20, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
16. Parker, Simon C, 2009. "Why do small firms produce the entrepreneurs?," The Journal of Socio-Economics, Elsevier, vol. 38(3), pages 484-494, June.
17. Pontus Braunerhjelm & Zoltan Acs & David Audretsch & Bo Carlsson, 2010. "The missing link: knowledge diffusion and entrepreneurship in endogenous growth," Small Business Economics, Springer, vol. 34(2), pages 105-125, February.
18. Stefan Bauernschuster & Oliver Falck & Robert Gold & Stephan Heblich, 2009. "The Shadows of the Past - How Implicit Institutions Influence Entrepreneurship," Jena Economic Research Papers 2009-044, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
19. Michael Fritsch & Oliver Falck, 2007. "New Business Formation by Industry over Space and Time: A Multidimensional Analysis," Regional Studies, Taylor and Francis Journals, vol. 41(2), pages 157-172.

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Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:

1. The imprint of socialism on entrepreneurship
   by Economic Logician in Economic Logic on 2012-07-30 14:23:00
2. [??]?????????????
   by himaginary in himaginaryの日記 on 2012-07-31 07:00:00

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Cited by:

1. Michael Fritsch & Alexander Kritikos & Alina Sorgner, 2013. "Drivers of Self-Employment - A Multivariate Decomposition Analysis for the Case of Germany," Jena Economic Research Papers 2013-006, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
2. Alina Sorgner & Michael Fritsch, 2013. "Occupational Choice and Self-Employment: Are They Related?," SOEPpapers on Multidisciplinary Panel Data Research 533, DIW Berlin, The German Socio-Economic Panel (SOEP).
   
   • Alina Sorgner & Michael Fritsch, 2013. "Occupational Choice and Self-Employment - Are They Related?," Jena Economic Research Papers 2013-001, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.

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