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Planning for Self-Employment at the Beginning of a Market Economy: Evidence from Individual Data of East German Workers


  • Michael Lechner
  • Friedhelm Pfeiffer


We investigate the plans of individual workers concerning future self-employment in the former German Democratic Republic (East Germany) shortly before the economic, monetary and social union in June/July 1990. Our data base is the Socio-Economic Panel (SOEP) East. We find that the desire to become an entrepreneur is basically determined by individual and household characteristics, including income and asset indicators, and not as much by the current job situation of the individual. Furthermore, we find evidence of barriers to entry which may come from capital market constraints and institutional restrictions. Due to the ordinal nature of the answers, we used the ordinal logit model for estimation. The corresponding stochastic assumptions are tested extensively using pseudo-Lagrange multiplier tests against omitted variables, non-linearity, asymmetry of distribution, and heteroscedasticity.
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  • Michael Lechner & Friedhelm Pfeiffer, 1992. "Planning for Self-Employment at the Beginning of a Market Economy: Evidence from Individual Data of East German Workers," Discussion Papers of DIW Berlin 42, DIW Berlin, German Institute for Economic Research.
  • Handle: RePEc:diw:diwwpp:dp42

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    References listed on IDEAS

    1. De Wit, Gerrit & Van Winden, Frans A. A. M., 1990. "An empirical analysis of self-employment in the Netherlands," Economics Letters, Elsevier, vol. 32(1), pages 97-100, January.
    2. Evans, David S & Jovanovic, Boyan, 1989. "An Estimated Model of Entrepreneurial Choice under Liquidity Constraints," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 808-827, August.
    3. George A. Akerlof & Andrew K. Rose & Janet L. Yellen & Helga Hessenius, 1991. "East Germany in from the Cold: The Economic Aftermath of Currency Union," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 22(1), pages 1-106.
    4. 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 719-748, August.
    5. David Blanchflower & B Meyer, 1991. "A Longitudinal Analysis of Young Entrepreneurs in Australia and the United States," CEP Discussion Papers dp0055, Centre for Economic Performance, LSE.
    6. Lechner, Michael, 1991. "Testing Logit Models in Practice," Empirical Economics, Springer, vol. 16(2), pages 177-198.
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    Cited by:

    1. Joachim Wagner, 2007. "What a Difference a Y makes-Female and Male Nascent Entrepreneurs in Germany," Small Business Economics, Springer, vol. 28(1), pages 1-21, January.
    2. Pfeiffer, Friedhelm & Reize, Frank, 2000. "Business start-ups by the unemployed -- an econometric analysis based on firm data," Labour Economics, Elsevier, vol. 7(5), pages 629-663, September.
    3. Pfeiffer, Friedhelm, 1999. "Existenzgründerpotentiale unter Arbeitsuchenden: Empirische Evidenz auf der Basis des Mikrozensus," ZEW Discussion Papers 99-02, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    4. Yannis Georgellis & Howard Wall, 2005. "Gender differences in self-employment," International Review of Applied Economics, Taylor & Francis Journals, vol. 19(3), pages 321-342.
    5. Skriabikova, Olga J. & Dohmen, Thomas & Kriechel, Ben, 2014. "New evidence on the relationship between risk attitudes and self-employment," Labour Economics, Elsevier, vol. 30(C), pages 176-184.
    6. Pfeiffer, Friedhelm, 2005. "Existenzgründungen: Ein Weg zur Beschäftigungsförderung? (Firm foundation * a way to enhance employment?)," Zeitschrift für ArbeitsmarktForschung - Journal for Labour Market Research, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 38(2/3), pages 325-340.
    7. repec:iab:iabzaf:v:38:i:2/3:p:325-340 is not listed on IDEAS
    8. repec:iab:iabmit:v:32:i:3:p:300-330 is not listed on IDEAS
    9. Joseph LiPuma & Scott Newbert & Jonathan Doh, 2013. "The effect of institutional quality on firm export performance in emerging economies: a contingency model of firm age and size," Small Business Economics, Springer, vol. 40(4), pages 817-841, May.
    10. Pfeiffer, Friedhelm, 1999. "Existenzgründerpotenziale unter Arbeitsuchenden: Empirische Evidenz auf der Basis des Mikrozensus (Potential for self-employment among jobseekers : empirical evidence on the basis of the microcensus)," Mitteilungen aus der Arbeitsmarkt- und Berufsforschung, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 32(3), pages 300-330.
    11. repec:iab:iabmit:v:33:i:3:p:518-532 is not listed on IDEAS
    12. Wyrwich, Michael, 2013. "Can socioeconomic heritage produce a lost generation with regard to entrepreneurship?," Journal of Business Venturing, Elsevier, vol. 28(5), pages 667-682.

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