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


  • 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)


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.

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

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    References listed on IDEAS

    1. Michael Fritsch & Michael Wyrwich, 2017. "The effect of entrepreneurship on economic development—an empirical analysis using regional entrepreneurship culture," Journal of Economic Geography, Oxford University Press, vol. 17(1), pages 157-189.
    2. Gary S. Becker, 1962. "Investment in Human Capital: A Theoretical Analysis," NBER Chapters, in: Investment in Human Beings, pages 9-49, National Bureau of Economic Research, Inc.
    3. Zoltán J. Ács & Pontus Braunerhjelm & David B. Audretsch & Bo Carlsson, 2015. "The knowledge spillover theory of entrepreneurship," Chapters, in: Global Entrepreneurship, Institutions and Incentives, chapter 7, pages 129-144, Edward Elgar Publishing.
    4. Michael Fritsch & Maria Kristalova & Michael Wyrwich, 2020. "Regional trajectories of entrepreneurship: the effect of socialism and transition," Jena Economics Research Papers 2020-010, Friedrich-Schiller-University Jena.
    5. Michael Fritsch & Michael Wyrwich, 2019. "The Persistence of Regional Entrepreneurship," International Studies in Entrepreneurship, in: Regional Trajectories of Entrepreneurship, Knowledge, and Growth, chapter 0, pages 27-46, Springer.
    6. Radosevic, Slavo, 1999. "Transformation of science and technology systems into systems of innovation in central and eastern Europe: the emerging patterns and determinants," Structural Change and Economic Dynamics, Elsevier, vol. 10(3-4), pages 277-320, December.
    7. David B. Audretsch (ed.), 2006. "Entrepreneurship, Innovation and Economic Growth," Books, Edward Elgar Publishing, number 4130.
    8. Audretsch, David B. & Keilbach, Max C. & Lehmann, Erik E., 2006. "Entrepreneurship and Economic Growth," OUP Catalogue, Oxford University Press, number 9780195183511.
    9. Michael Fritsch & Michael Wyrwich, 2019. "The Role of Knowledge," International Studies in Entrepreneurship, in: Regional Trajectories of Entrepreneurship, Knowledge, and Growth, chapter 0, pages 95-117, Springer.
    10. Michael Fritsch & Alina Sorgner & Michael Wyrwich & Evguenii Zazdravnykh, 2019. "Historical shocks and persistence of economic activity: evidence on self-employment from a unique natural experiment," Regional Studies, Taylor & Francis Journals, vol. 53(6), pages 790-802, June.
    11. Ark Bart van, 1995. "The Manufacturing Sector in East Germany: A Reassessment of Comparative Productivity Performance, 1950-1988," Jahrbuch für Wirtschaftsgeschichte / Economic History Yearbook, De Gruyter, vol. 36(2), pages 75-100, December.
    12. Fritsch, Michael, 2013. "New Business Formation and Regional Development: A Survey and Assessment of the Evidence," Foundations and Trends(R) in Entrepreneurship, now publishers, vol. 9(3), pages 249-364, February.
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    More about this item


    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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