IOS Working Papers: Former Communist party membership and present-day entrepreneurship in Central and Eastern Europe

“The following countries are included into our instrumental variable analysis: Poland, Czech Republic, Slovakia, Hungary, Romania, Bulgaria, the seven successor states of Yugoslavia (Bosnia and Herzegovina, Croatia, Former Yugoslav Republic of Macedonia, Kosovo, Montenegro, Slovenia, Serbia), Albania, as well as the Baltic States (Estonia, Latvia, Lithuania) and Moldova. In the first part of the paper, we show results using all transition economies, including the former USSR.”

 

Abstract

After the collapse of Communism in Central and Eastern Europe, former party members were particularly likely to start businesses and become entrepreneurs. However, it remains unclear whether this entrepreneurial activity was driven by the resources, information and opportunities provided by former party membership or because people with specific individual attributes were more likely to become party members (self-selection). This study is the first to separate the causal effect of former Communist party membership from self-selection. Using individual-level Life in Transition–III survey and instrumental variables analysis, we find that, in Central and Eastern European countries, membership of former Communist party has facilitated business set-up but not business longevity. Our results also suggest evidence of negative self-selection, meaning that people who joined the former ruling party tended have fewer of the traits associated with entrepreneurship such as motivation, risk tolerance, and entrepreneurial spirit. We show that former Communist party membership still matters for business practices, business ethics, and the nature of doing business in transition economies.

 

Artjoms Ivlevs, Milena Nikolova, and Olga Popova, Former Communist party membership and present-day entrepreneurship in Central and Eastern Europe, 40 S., November 2019.

 

2019

 

Nr. 384

 

Working Papers (ISSN: 2199-9465)

 

IOS-Publikationen

 

Vollversion:

https://www.ios-regensburg.de/ios-publikationen/diskussionspapiere/working-papers/wp-2019.html