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The shadows of the socialist past: Lack of self-reliance hinders entrepreneurship

  • Bauernschuster, Stefan
  • Falck, Oliver
  • Gold, Robert
  • Heblich, Stephan

We provide empirical evidence that the experience of a socialist regime leads to a lack of self-reliance by comparing East and West Germans conditional on regional differences in current economic development. This meaningful lack of self-reliance persists after the regime’s breakdown and hinders the development of an entrepreneurial spirit, which might hamper the transition process. Since East Germany adopted the formal institutions of a market economy quasi overnight when reunifying with West Germany, we avoid simultaneity issues regarding current institutions and preferences. Further tentative evidence suggests that the socialist regime also affected the composition of the East German population by inducing selective migration before the construction of the Berlin Wall in 1961.

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Paper provided by University of Munich, Department of Economics in its series Munich Reprints in Economics with number 20118.

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Date of creation: 2012
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Publication status: Published in European Journal of Political Economy 4 28(2012): pp. 485-497
Handle: RePEc:lmu:muenar:20118
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Web page: http://www.vwl.uni-muenchen.de

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  1. Falck Oliver & Heblich Stephan & Link Susanne, 2012. "Forced Migration and the Effects of an Integration Policy in Post-WWII Germany," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 12(1), pages 1-29, May.
  2. Earle, John S. & Sakova, Zuzana, 2000. "Business start-ups or disguised unemployment? Evidence on the character of self-employment from transition economies," Labour Economics, Elsevier, vol. 7(5), pages 575-601, September.
  3. Stefan Bauernschuster & Helmut Rainer, 2012. "Political regimes and the family: how sex-role attitudes continue to differ in reunified Germany," Journal of Population Economics, Springer, vol. 25(1), pages 5-27, January.
  4. Hillman, Arye L., 2010. "Expressive behavior in economics and politics," European Journal of Political Economy, Elsevier, vol. 26(4), pages 403-418, December.
  5. Hillman, Arye L., 1994. "The transition from socialism: An overview from a political economy perspective," European Journal of Political Economy, Elsevier, vol. 10(1), pages 191-225, May.
  6. Kornai, Janos, 1992. "The Socialist System: The Political Economy of Communism," OUP Catalogue, Oxford University Press, number 9780198287766, March.
  7. Michael Wyrwich, 2011. "Regional Entrepreneurial Heritage in a Socialist and Post-socialist Economy," ERSA conference papers ersa10p495, European Regional Science Association.
  8. Rainer, Helmut & Siedler, Thomas, 2009. "Does democracy foster trust?," Munich Reprints in Economics 19809, University of Munich, Department of Economics.
  9. Sendhil Mullainathan & Marianne Bertrand, 2001. "Do People Mean What They Say? Implications for Subjective Survey Data," American Economic Review, American Economic Association, vol. 91(2), pages 67-72, May.
  10. Baumol, William J, 1990. "Entrepreneurship: Productive, Unproductive, and Destructive," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 893-921, October.
  11. Denice DiPasquale & Edward L. Glaeser, 1997. "Incentives and Social Capital: Are Homeowners Better Citizens?," Harvard Institute of Economic Research Working Papers 1815, Harvard - Institute of Economic Research.
  12. Fuchs-Schundeln, Nicola & Alesina, Alberto, 2007. "Good-Bye Lenin (Or Not?): The Effect of Communism on People's Preferences," Scholarly Articles 4553032, Harvard University Department of Economics.
  13. Kihlstrom, Richard E & Laffont, Jean-Jacques, 1979. "A General Equilibrium Entrepreneurial Theory of Firm Formation Based on Risk Aversion," Journal of Political Economy, University of Chicago Press, vol. 87(4), pages 719-48, August.
  14. Smallbone, David & Welter, Friederike, 2001. " The Distinctiveness of Entrepreneurship in Transition Economies," Small Business Economics, Springer, vol. 16(4), pages 249-62, June.
  15. Michael Wyrwich, 2012. "Regional Entrepreneurial Heritage in a Socialist and a Postsocialist Economy," Economic Geography, Clark University, vol. 88(4), pages 423-445, October.
  16. Heiko Bergmann & Rolf Sternberg, 2007. "The Changing Face of Entrepreneurship in Germany," Small Business Economics, Springer, vol. 28(2), pages 205-221, March.
  17. John McMillan & Christopher Woodruff, 2002. "The Central Role of Entrepreneurs in Transition Economies," Journal of Economic Perspectives, American Economic Association, vol. 16(3), pages 153-170, Summer.
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