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How Much of a Socialist Legacy? The Reemergence of Entrepreneurship in the East German Transformation to a Market Economy

  • 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)

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.

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Paper provided by Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics in its series Jena Economic Research Papers with number 2012-042.

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Date of creation: 16 Jul 2012
Date of revision:
Publication status: Published as "How much of a socialist legacy? The re-emergence of entrepreneurship in the East German transformation to a market economy", in: Small Business Economics 43 (2012), 427-446.
Handle: RePEc:jrp:jrpwrp:2012-042
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