Abstract
We investigate the plans of individual workers concerning future self-employment in the former German Democratic Republic shortly before the economic, monetary and social union in June/July 1990. Our data base is the Socio-Economic Panel 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. The work experience attained in the socialist economy seems to be irrelevant for the decision to become self-employed in a market economy. Furthermore, we find evidence of barriers to entry which may come from capital market constraints and institutional restrictions. We also present an estimation of the determinants of the probability of being self-employed in Summer 1990. Due to institutional restrictions we find only a few individual characteristics to be important.
For estimation, we use the binary and the ordinal logit model. The corresponding stochastic assumptions are tested extensively using pseudo-Lagrange multiplier tests against omitted variables, non-linearity, asymmetry of distribution, and heteroscedasticity.
Similar content being viewed by others
References
Akerlof, George A., Andrew K. Rose, Janet K. Yellen and Helga Hesenius, 1991, ‘East Germany in from the Cold: The Economic Aftermath of Currency Union’,Brookings Papers on Economic Activity 1, 1–105.
Balling, Hans, 1990,Steuerrecht der DDR, Berlin: Staatsverlag.
Bannash, Hans-Gerd, 1990, ‘The Role of Small Firms in East Germany’,Small Business Economics 2(4), 307–311.
Blanchflower, David G. and Bruce D. Meyer, 1991, ‘A Longitudinal Analysis of Young Entrepreneurs in Australia and the United States’,NBER Working Paper, # 3746, Small Business Economics (forthcoming).
Bögenhold, Dieter and Udo Stabler, 1990, ‘Selbständigkeit als ein Reflex auf Arbeitslosigkeit? Makrosoziologische Befunde einer international-komparativen Studie’,Kölner Zeitschrift für Soziologie und Sozialpsychologie 42(2), 265–279.
Börsch-Supan, Axel and Friedhelm Pfeiffer, 1990, ‘Determinanten der Selbständigkeit in der Bundesrepublik Deutschland’ forthcoming in Reinhard Hujer and Hilmar Schneider (eds),Person und Haushalt in Wirtschafi und Gesellschaft, Frankfurt: Campus.
Brock, William A. and David S. Evans, 1986,The Economics of Small Businesses. Their Role and Regulation in the U.S. Economy, New York: Holmes & Meier.
Bundesministerium für innerdeutsche Beziehungen (eds), 1985,DDR-Handbuch, 3. ed. Köln: Verlag Wissenschaft und Politik.
Casson, Mark, 1982,The Entrepreneur: An Economic Theory, Oxford: Martin Robertson.
Deutsches Institut für Wirtschaftsforschung, 1991a, ‘Gesamtwirtschaftliche und unternehmerische Anpassungsprozesse in Ostdeutschland’, Erster BerichtWochenbericht 12.
Deutsches Institut für Wirtschaftsforschung, 1991b, ‘Gesamtwirtschaftliche und unternehmerische Anpassungsprozesse in Ostdeutschland’, Zweiter BerichtWochenbericht 24.
De Wit, Gerrit and Frans A. A. M. Van Winden, 1989, ‘An Empirical Analysis of Self-Employment in the Netherlands’,Small Business Economics 1(4), 263–272.
Evans, David S. and Boyan Jovanovich, 1989, ‘An Estimated Model of Entrepreneurial Choice under Liquidity Constraints’,Journal of Political Economy 97(4), 808–827.
Evans, David S. and Linda S. Leighton, 1989, ‘Some Empirical Aspects of Entrepreneurship’,American Economic Review 79(3), 519–535.
Evans, David S. and Linda S. Leighton, 1990, ‘Small Business Formation by Unemployed and Employed Workers’,Small Business Economics 2(4), 319–330.
Habermann, Gerd, 1990, ‘Die deutsche Handwerksordnung als Relikt der Gewerbebindung’,Ordo 41, 173–193.
Hirschman, Albert O., 1965, ‘Obstacles to Development: A Classification and a Quasi-Vanishing Act’,Economic Development and Cultural Change 13(4, 1), 385–393.
Hübler, Olaf, 1992, ‘Selbständige in Ostdeutschland. Eine theoretische und mikroökonometrische Analyse’, University of Hannover, unpublished manuscript.
Hübler, Olaf, 1991, ‘Was unterscheidet Freiberufler, Gewerbetreibende und abhängig Beschäftigte? Eine ökonometrische Untersuchung über Gruppenheterogenität, Einkommensdeterminanten und Statuswechsler’,Mitteilungen aus der Arbeitsmarkt- und Berufsforschung 24, 101–114.
Ivaldi, Mark, 1990, ‘Statistical Methods and Business Surveys’, in Jean-Pierre Florens, Marc Ivaldi, Jean-Jacques Laffont and François Laisney (eds),Microeconometrics: Surveys and Applications, Oxford: Basil Blackwell, 84–122.
Kihlstrom, Richard E. and Jean-Jacques Laffont, 1979, ‘A General Equilibrium Entrepreneurial Theory of Firm Formation Based on Risk Aversion’,Journal of Political Economy 87(4), 719–748.
Kurz, Rudi, Werner Röger and Michael Zarth, 1990,Existenzgründungshilfen von Bund und Ländern. Eine Wirkungsanalyse der Programme im Hinblick auf Wettbewerb, Produktivitätswachstum und Bewchäftigung. Gutachten im Auftrag des Wirtschafisministeriums, Tübingen: Inst. für Angewandte Wirtschaftsforschung.
Lechner, Michael, 1991, ‘Testing Logit Models in Practice’,Empirical Economics 16, 177–198.
Lechner, Michael, Friedhelm Pfeiffer and Linda Giesecke O'Shea, 1992, ‘Expected Job Loss in East Germany shortly before German Unification’, forthcoming in Empirical Economics.
Low, William, James McIntosh and Fabio Schiantarelli, 1990, ‘What Can We Learn about Firmss Output, Employment and Pricing Decisions from Business Surveys? Some Evidence for UK Companies’, in Jean-Pierre Florens, Marc Ivaldi, Jean-Jacques Laffont and François Laisney (eds),Microeconometrics: Surveys and Applications, Oxford: Basil Blackwell, 145–160.
Lucas, Robert E., 1978, ‘On the Size Distribution of Firms’,Bell Journal of Economics 9, 508–526.
Maddala, G. S., 1983,Limited-dependent and Qualitative Variables in Econometrics, Cambridge: Cambridge University Press.
Magnac Thierry and Jean-Marie Robin, 1990, ‘Econometric Analysis of the Transitions between Self-Employment and Wage-Work’,Delta 90-09, unpublished manuscript.
Mirbach, Horst G., 1989,Das Recht auf selbständige Arbeit. Unternehmensgründung und Handwerksrecht, Bonn: Norman Rentrop.
Pfeiffer, Friedhelm and Winfried Pohlmeier, 1992, ‘Income Uncertainty and the Probability of Self-Employment’, forthcoming in Recherches Economiques de Louvain.
Projektgruppe Panel, 1990, ‘Das Sozio-ökonmische Panel für die Bundesrepublik Deutschland nach fünf Wellen’,Vierteljahreshefte zur Wirtschaftsforschung 2/3, 141–151.
Roman, Zoltan, 1990, ‘The Size of the Small-Sector in Hungary’, in Z. J. Acs and D. B. Audretsch (eds),The Economics of Small Firms: A European Challenge, pp. 199–204.
Schupp, Jürgen and Gert Wagner, 1990, ‘Die DDR-Basisbefragung des Sozio-ökonomischen Panels’,Vierteljahreshefte zur Wirtschaftsforschung 2/3, 152–159.
Sinn, Hans-Werner, 1991, ‘Privatisation in East Germany’,CES Working Paper # 8.
Wärneryd, Karl-Erik, 1988, ‘The Psychology of Innovative Entrepreneurship’, in Fred W. van Raaij, Gery M. van Veldjoran and Karl-Erik Wärneryd (eds),The Handbook of Economic Psychology, Dordrecht: Kluwer Academic, pp. 1–49.
Weber, Max, 1980,Wirtschaft und Gesellschaft. Grundriß der verstehenden Soziologie (1. ed. 1922), 5. ed (revised by Johannes Winckelmann), Tübingen: Mohr.
Author information
Authors and Affiliations
Rights and permissions
About this article
Cite this article
Lechner, M., Pfeiffer, F. Planning for self-employment at the beginning of a market economy: Evidence from individual data of East German workers. Small Bus Econ 5, 111–128 (1993). https://doi.org/10.1007/BF01531910
Accepted:
Issue Date:
DOI: https://doi.org/10.1007/BF01531910