Entrepreneurship from Scratch: Lessons on the Entry Decision into Self-Employment from Transition Economies

John Earle and Zuzana Sakova
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Zuzana Sakova: affiliation not available

No 79, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This paper exploits the rapid rise in self-employment rates in post-communist Eastern Europe as a valuable "quasi-experiment" for understanding the sources of entrepreneurship. A relative demand-supply model and an individual sectoral choice model are used to analyze a 1993 survey of 27,000 adults in six transition economies. Estimated self-employment earnings premia are positive, and the data imply positive selection into both employee and self-employment status. Structural probit estimates show the probability of self-employment entry is unassociated with former Communist Party affiliation but positively related to schooling, pre-transition family income, receipt of property in restitution, pre-communist family business-holding, and predicted earnings differential. Cross-country variation in predicted self-employment entry rates and relative earnings provide evidence on the demand and supply factors affecting the decision to become an entrepreneur.

Keywords: Entrepreneurship; self-employment; transition; small business; selection bias; structural probit Eastern Europe; Bulgaria; Czech Republic; Hungary; Poland; Russia; Slovakia (search for similar items in EconPapers)
JEL-codes: J23 J24 J62 M13 O57 P2 (search for similar items in EconPapers)
Pages: 48 pages
Date: 1999-12
New Economics Papers: this item is included in nep-lab
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Citations: View citations in EconPapers (22)

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