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Planning for self-employment at the beginning of a market economy: evidence from individual data of East German workers

  • Lechner, Michael
  • Pfeiffer, Friedhelm

We investigate the plans of individual workers concerning future self-employment in the former German Democratic Republic (East Germany) shortly before the economic, monetary and social union in June/July 1990. Our data base is the Socio-Economic Panel (SOEP) East. We find that the desire to become an entrepreneur is basically determined by individual and household characteristics, including income and asset indicators, and not as much by the current job situation of the individual. Furthermore, we find evidence of barriers to entry which may come from capital market constraints and institutional restrictions. Due to the ordinal nature of the answers, we used the ordinal logit model for estimation. The corresponding stochastic assumptions are tested extensively using pseudo-Lagrange multiplier tests against omitted variables, non-linearity, asymmetry of distribution, and heteroscedasticity.

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Paper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 92-01.

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Date of creation: 1992
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Handle: RePEc:zbw:zewdip:9201
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  1. Evans, David S & Jovanovic, Boyan, 1989. "An Estimated Model of Entrepreneurial Choice under Liquidity Constraints," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 808-27, August.
  2. David Blanchflower & B Meyer, 1991. "A Longitudinal Analysis of Young Entrepreneurs in Australia and the United States," CEP Discussion Papers dp0055, Centre for Economic Performance, LSE.
  3. 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.
  4. Lechner, Michael, 1991. "Testing Logit Models in Practice," Empirical Economics, Springer, vol. 16(2), pages 177-98.
  5. De Wit, G. & Winden, F., 1989. "An Empirical Analysis Of Self-Employment In The Netherlands," Papers 89.02, NEUHUYS - RESEARCH INSTITUTE FOR SMALL AND MEDIUM.
  6. George A. Akerlof & Andrew K. Rose & Janet L. Yellen & Helga Hessenius, 1991. "East Germany in from the Cold: The Economic Aftermath of Currency Union," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 22(1), pages 1-106.
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