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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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  • 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.

Suggested Citation

  • Michael Fritsch & Elisabeth Bublitz & Alina Rusakova & Michael Wyrwich, 2012. "How Much of a Socialist Legacy? The Reemergence of Entrepreneurship in the East German Transformation to a Market Economy," Jena Economic Research Papers 2012-042, Friedrich-Schiller-University Jena.
  • Handle: RePEc:jrp:jrpwrp:2012-042
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    More about this item

    Keywords

    Entrepreneurship; self-employment; new business formation; transformation; East Germany;
    All these keywords.

    JEL classification:

    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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