Entrepreneurship, victimization and the historical legacy of war: evidence from Eastern Europe and Central Asia∗

We study the effect of family victimization and displacement during World War II on entrepreneurship and employment in the former communist countries of Eastern Europe and Central Asia. Using the 2010 Life in Transition Survey, we document a limited impact of war exposure on overall employment rates, employment with a formal contract, or whether the respondent works in a high-skill industry. However, our analysis points to long-term scarring effects of war on entrepreneurial behavior, possibly working through different attitudes toward institutions and redistribution in individuals from victimized families. Our results are robust to controlling for fixed sub-national factors, a wide range of individual characteristics, as well as to using non-survey measures of war exposure. Preliminary draft. Comments welcome. ∗We would like to thank Sergei Guriev for many helpful discussions, as well as Ralph de Haas for useful comments. Milena Djourelova and Simon Hess provided excellent research assistance. The views expressed in this paper are those of the authors only and not necessarily of the EBRD.