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Initial Conditions and Regional Performance in the Aftermath of Disruptive Shocks: The Case of East Germany after Socialism

Author

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  • Michael Fritsch

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

  • Michael Wyrwich

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

Abstract

We investigate how initial conditions that existed in East Germany at the end of the socialist regime impact regional development during the turbulent shock transition to a market economic system. Our investigation spans a period of almost 30 years. Both the self-employment rate (an indication of the existence of a pre-socialist entrepreneurial tradition) and the share of the workforce with a tertiary degree have a strong positive effect on regional development. We conclude that knowledge and a tradition of entrepreneurship have long-run positive effects on development in regions that face disruptive shocks. Entrepreneurship and knowledge play a less important role for development across West German regions, where no significant shocks occurred.

Suggested Citation

  • Michael Fritsch & Michael Wyrwich, 2020. "Initial Conditions and Regional Performance in the Aftermath of Disruptive Shocks: The Case of East Germany after Socialism," Jena Economic Research Papers 2020-017, Friedrich-Schiller-University Jena.
  • Handle: RePEc:jrp:jrpwrp:2020-017
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Entrepreneurship; knowledge; economic development; history; transformation; East Germany;
    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
    • N93 - Economic History - - Regional and Urban History - - - Europe: Pre-1913
    • N94 - Economic History - - Regional and Urban History - - - Europe: 1913-

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