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Regional trajectories of entrepreneurship: the effect of socialism and transition

Author

Listed:
  • Michael Fritsch

    () (Friedrich Schiller University Jena and Halle Institute for Economic Research (IWH), Germany)

  • Maria Kristalova

    () (Friedrich Schiller University Jena, Germany)

  • Michael Wyrwich

    () (University of Groningen, The Netherlands, and Friedrich Schiller University Jena, Germany)

Abstract

We investigate how major historical shocks affect regional trajectories of economic activity. To this end, we conduct a comparative analysis of the development of entrepreneurship in East and West Germany after World War II. The introduction of an anti-entrepreneurial socialist economy in East Germany in 1949, and the subsequent transformation to a market economy four decades later were major historical shocks to the economy in general, and to entrepreneurship specifically. Our comparative analysis of East and West Germany assesses how these shocks affected the level of entrepreneurship at the regional level. Surprisingly, our results show that socialism does not have a long-run negative effect on the prevalence of self-employment in East Germany, despite the severe anti- entrepreneurial policies prevalent in Soviet-style socialism. Quite to the contrary, there is actually a positive treatment effect of German separation and reunification. Further analyses suggest that current structural differences in regional levels of self-employment in Germany are not pre- dominantly due to the socialist legacy of the East, but mainly a result of the shock transformation that occurred with reunification.

Suggested Citation

  • Michael Fritsch & Maria Kristalova & Michael Wyrwich, 2020. "Regional trajectories of entrepreneurship: the effect of socialism and transition," Jena Economic Research Papers 2020-010, Friedrich-Schiller-University Jena.
  • Handle: RePEc:jrp:jrpwrp:2020-010
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Entrepreneurship; self-employment; transition; socialism; regional development; GDR;
    All these keywords.

    JEL classification:

    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • N94 - Economic History - - Regional and Urban History - - - Europe: 1913-
    • P25 - Economic Systems - - Socialist Systems and Transition Economies - - - Urban, Rural, and Regional Economics

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