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How Much of a Socialist Legacy? The Reemergence of Entrepreneurship in the East German Transformation to a Market Economy

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Author Info

  • Michael Fritsch

    ()
    (School of Economics and Business Administration, Friedrich-Schiller-University Jena)

  • Elisabeth Bublitz

    ()
    (Friedrich Schiller University Jena, School of Economics and Business Administration)

  • Alina Rusakova

    ()
    (School of Economics and Business Administration, Friedrich-Schiller-University Jena)

  • Michael Wyrwich

    ()
    (School of Economics and Business Administration, Friedrich-Schiller-University Jena)

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

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References

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  1. Bosma, Niels & Hessels, Jolanda & Schutjens, Veronique & Praag, Mirjam Van & Verheul, Ingrid, 2012. "Entrepreneurship and role models," Journal of Economic Psychology, Elsevier, vol. 33(2), pages 410-424.
  2. 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).
  3. Audretsch, David B & Keilbach, Max, 2003. "Entrepreneurship Capital and Economic Performance," CEPR Discussion Papers 3678, C.E.P.R. Discussion Papers.
  4. 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.
  5. 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.
  6. 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).
  7. 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.
  8. P. Mueller, 2006. "Entrepreneurship in the Region: Breeding Ground for Nascent Entrepreneurs?," Small Business Economics, Springer, vol. 27(1), pages 41-58, August.
  9. 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.
  10. Edward P. Lazear, 2004. "Balanced Skills and Entrepreneurship," American Economic Review, American Economic Association, vol. 94(2), pages 208-211, May.
  11. 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.
  12. Parker, Simon C, 2009. "Why do small firms produce the entrepreneurs?," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 38(3), pages 484-494, June.
  13. Minniti, Maria, 2005. "Entrepreneurship and network externalities," Journal of Economic Behavior & Organization, Elsevier, vol. 57(1), pages 1-27, May.
  14. David Audretsch & Michael Fritsch, 2002. "Growth Regimes over Time and Space," Regional Studies, Taylor & Francis Journals, vol. 36(2), pages 113-124.
  15. 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.
  16. Michael Fritsch & Oliver Falck, 2007. "New Business Formation by Industry over Space and Time: A Multidimensional Analysis," Regional Studies, Taylor & Francis Journals, vol. 41(2), pages 157-172.
  17. 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.
  18. 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).
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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. 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.
  2. 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.

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