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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 implies 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.

Abstract:
We study the character of self-employment, drawing upon household survey evidence from six transition economies. Multinomial-logit analysis distinguishing employers from own-account self-employed and comparing both groups to employees and unemployed finds that own-account status is intermediate in most characteristics; tests reject the pooling of any of these categories. Selection-bias-corrected earnings premia are large for employers and smaller for own-account. A structural polychotomous model shows that employers respond strongly to predicted earnings premia in all countries, while the own-account response is estimated to be negative, supporting the interpretation that individuals may be pushed into own-account status by lack of work opportunities.

self-employment, entrepreneurship, transition, private employment, Eastern Europe

Abstract:
This paper presents an empirical analysis of the role of privatization policy design in creating a constituency for economic reform, focusing on the case of the Czech Republic in the early 1990s. Drawing on a sample survey of 1459 Czech individuals in January 1996, we construct attitudinal indicators of the respondents' reactions to reforms, their opinions on the roles of the state and the market in the economy, their perceptions of the legitimacy of transition, and their democratic values. Using ordered probit estimation techniques, and controlling for income and a variety of other individual characteristics, we find that receiving property through the extensive Czech program of restitution is strongly associated with higher support for reform, markets, and democracy. Concerning the voucher privatization program, we find that participants tend to be more supportive of reform than non-participants, but most of this effect is accounted for by the stronger support of participants who have retained their shares rather than selling shortly after receiving them. Among workers employed in firms of different ownership types, there is a weak tendency for workers in privatized firms to oppose reforms, but a clear propensity of entrepreneurs to support them. The magnitude of these estimated effects is typically large: our policy simulations show, for example, that the total impact of all these dimensions of the privatization process nearly double the proportion of the population in "strong" opposition to price controls. The results provide evidence for the hypothesis that the particular design of a reform program may have important effects on the attitudes of the citizenry, including their willingness to support reforms and their faith in markets and democracy.