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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.

Suggested Citation

  • Bauernschuster, Stefan & Falck, Oliver & Gold, Robert & Heblich, Stephan, 2012. "The shadows of the socialist past: Lack of self-reliance hinders entrepreneurship," European Journal of Political Economy, Elsevier, vol. 28(4), pages 485-497.
    • Handle: RePEc:eee:poleco:v:28:y:2012:i:4:p:485-497
    DOI: 10.1016/j.ejpoleco.2012.05.008
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    More about this item

    Keywords

    Self-reliance; Entrepreneurship; Socialism; Capitalism;
    All these keywords.

    JEL classification:

    • L29 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Other
    • A13 - General Economics and Teaching - - General Economics - - - Relation of Economics to Social Values
    • P39 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - Other

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