The Long-Run Effects of Communism and Transition to a Market System on Self-Employment: The Case of Germany

Michael Fritsch (), Maria Greve and Michael Wyrwich

Entrepreneurship Theory and Practice, 2023, vol. 47, issue 5, 1594-1616

Abstract: We investigate how self-employment in East Germany was impacted by 40Â years of Soviet-style communism and the subsequent shock transition to a market economic system. To this end, we compare self-employment in East and West Germany after reunification with self-employment before the separation of Germany after World War II. Our results show that the strict anti-entrepreneurial policies prevalent during the Soviet regime do not have a long-run negative effect on self-employment in East Germany. Quite to the contrary, self-employment in East Germany today is higher than before German separation. This finding cannot be explained by necessity self-employment. Our analysis suggests that current differences in self-employment between East and West Germany are pre-dominantly a result of the sudden shock transformation that occurred with reunification, rather than the outcome of four decades of anti-entrepreneurial policies and ideology.

Keywords: entrepreneurship; self-employment; transition; communism; economic development; Germany (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:sae:entthe:v:47:y:2023:i:5:p:1594-1616

DOI: 10.1177/10422587221094498

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