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The Long-Run Effects of Communism and Transition to a Market System on Self-Employment: The Case of Germany

Author

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  • Michael Fritsch
  • Maria Greve
  • Michael Wyrwich

Abstract

We investigate how self-employment in East Germany was impacted by 40Â years of Soviet-style communism and the subsequent shock transition to a market economic system. To this end, we compare self-employment in East and West Germany after reunification with self-employment before the separation of Germany after World War II. Our results show that the strict anti-entrepreneurial policies prevalent during the Soviet regime do not have a long-run negative effect on self-employment in East Germany. Quite to the contrary, self-employment in East Germany today is higher than before German separation. This finding cannot be explained by necessity self-employment. Our analysis suggests that current differences in self-employment between East and West Germany are pre-dominantly a result of the sudden shock transformation that occurred with reunification, rather than the outcome of four decades of anti-entrepreneurial policies and ideology.

Suggested Citation

  • Michael Fritsch & Maria Greve & Michael Wyrwich, 2023. "The Long-Run Effects of Communism and Transition to a Market System on Self-Employment: The Case of Germany," Entrepreneurship Theory and Practice, , vol. 47(5), pages 1594-1616, September.
    • Handle: RePEc:sae:entthe:v:47:y:2023:i:5:p:1594-1616
    DOI: 10.1177/10422587221094498
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