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The shadows of the socialist past: Lack of self-reliance hinders entrepreneurship

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  • Bauernschuster, Stefan
  • Falck, Oliver
  • Gold, Robert
  • Heblich, Stephan

Abstract

We provide empirical evidence that the experience of a socialist regime leads to a lack of self-reliance by comparing East and West Germans conditional on regional differences in current economic development. This meaningful lack of self-reliance persists after the regime’s breakdown and hinders the development of an entrepreneurial spirit, which might hamper the transition process. Since East Germany adopted the formal institutions of a market economy quasi overnight when reunifying with West Germany, we avoid simultaneity issues regarding current institutions and preferences. Further tentative evidence suggests that the socialist regime also affected the composition of the East German population by inducing selective migration before the construction of the Berlin Wall in 1961.

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Bibliographic Info

Paper provided by University of Munich, Department of Economics in its series Munich Reprints in Economics with number 20118.

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Date of creation: 2012
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Publication status: Published in European Journal of Political Economy 4 28(2012): pp. 485-497
Handle: RePEc:lmu:muenar:20118

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  1. Kornai, Janos, 1992. "The Socialist System: The Political Economy of Communism," OUP Catalogue, Oxford University Press, number 9780198287766, October.
  2. Michael Wyrwich, 2011. "Regional Entrepreneurial Heritage in a Socialist and Post-socialist Economy," ERSA conference papers ersa10p495, European Regional Science Association.
  3. Stefan Bauernschuster & Helmut Rainer, 2012. "Political regimes and the family: how sex-role attitudes continue to differ in reunified Germany," Journal of Population Economics, Springer, vol. 25(1), pages 5-27, January.
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  5. Heiko Bergmann & Rolf Sternberg, 2007. "The Changing Face of Entrepreneurship in Germany," Small Business Economics, Springer, vol. 28(2), pages 205-221, March.
  6. Rainer, Helmut & Siedler, Thomas, 2006. "Does Democracy Foster Trust?," IZA Discussion Papers 2154, Institute for the Study of Labor (IZA).
  7. Smallbone, David & Welter, Friederike, 2001. " The Distinctiveness of Entrepreneurship in Transition Economies," Small Business Economics, Springer, vol. 16(4), pages 249-62, June.
  8. DiPasquale, Denise & Glaeser, Edward L., 1999. "Incentives and Social Capital: Are Homeowners Better Citizens?," Journal of Urban Economics, Elsevier, vol. 45(2), pages 354-384, March.
  9. Fuchs-Schundeln, Nicola & Alesina, Alberto, 2007. "Good-Bye Lenin (Or Not?): The Effect of Communism on People's Preferences," Scholarly Articles 4553032, Harvard University Department of Economics.
  10. Baumol, William J, 1990. "Entrepreneurship: Productive, Unproductive, and Destructive," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 893-921, October.
  11. Falck Oliver & Heblich Stephan & Link Susanne, 2012. "Forced Migration and the Effects of an Integration Policy in Post-WWII Germany," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 12(1), pages 1-29, May.
  12. Hillman, Arye L., 2010. "Expressive behavior in economics and politics," European Journal of Political Economy, Elsevier, vol. 26(4), pages 403-418, December.
  13. Earle, John S. & Sakova, Zuzana, 2000. "Business start-ups or disguised unemployment? Evidence on the character of self-employment from transition economies," Labour Economics, Elsevier, vol. 7(5), pages 575-601, September.
  14. Sendhil Mullainathan & Marianne Bertrand, 2001. "Do People Mean What They Say? Implications for Subjective Survey Data," American Economic Review, American Economic Association, vol. 91(2), pages 67-72, May.
  15. Kihlstrom, Richard E & Laffont, Jean-Jacques, 1979. "A General Equilibrium Entrepreneurial Theory of Firm Formation Based on Risk Aversion," Journal of Political Economy, University of Chicago Press, vol. 87(4), pages 719-48, August.
  16. Michael Wyrwich, 2012. "Regional Entrepreneurial Heritage in a Socialist and a Postsocialist Economy," Economic Geography, Clark University, vol. 88(4), pages 423-445, October.
  17. Hillman, Arye L., 1994. "The transition from socialism: An overview from a political economy perspective," European Journal of Political Economy, Elsevier, vol. 10(1), pages 191-225, May.
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Cited by:
  1. Facchini, François & Melki, Mickaël, 2013. "Efficient government size: France in the 20th century," European Journal of Political Economy, Elsevier, vol. 31(C), pages 1-14.
  2. Necker, Sarah & Voskort, Andrea, 2013. "The evolution of German's values since reunification," Freiburg Discussion Papers on Constitutional Economics 13/13, Walter Eucken Institut e.V..
  3. Björn Kauder & Niklas Potrafke, 2013. "Government Ideology and Tuition Fee Policy: Evidence from the German States," CESifo Economic Studies, CESifo, vol. 59(4), pages 628-649, December.
  4. Boenisch, Peter & Schneider, Lutz, 2013. "The social capital legacy of communism-results from the Berlin Wall experiment," European Journal of Political Economy, Elsevier, vol. 32(C), pages 391-411.
  5. Thomas P. Triebs & Justin Tumlinson, 2013. "Learning Capitalism the Hard Way—Evidence from Germany's Reunification," NBER Working Papers 19209, National Bureau of Economic Research, Inc.

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