Entrepreneurship and the evolution of income distributions in Poland and Russia

Differences in the evolution of Polish and Russian income distributions in the post-socialist era can be attributed to different rates of entry of new enterprises. Using regional differences during early privatization as instruments to estimate the impact of this entry, we find that a one-standard-deviation increase in the share of the workforce in new or small enterprises increases the share of income earned by the lowest forty percent of the population by 1.4% and by 1.25% in Polish and Russian regions, respectively. Poland's greater success in de novo firm entry contributes to its more equitable income distribution during the transition. Journal of Comparative Economics 34 (2) (2006) 338-356.