The effects of TV content on entrepreneurship: Evidence from German unification

Abstract

This paper empirically analyzes whether television (TV) can influence individuals’ decisions to start businesses. To identify TV's effects, we rely on a unique quasi-natural experiment related to the division of Germany after WWII until 1990 into West Germany with a free market economy and the socialist East Germany where starting one's own business was not permitted. Despite this division, Western TV was exogeneously available since the 1960s in some, but not all East German regions and conveyed images and attitudes conducive to entrepreneurship. We use both regional-level and geo-referenced individual-level data and show that since starting a business in East Germany became possible thanks to the reunification in 1990, entrepreneurship incidence is higher in East German regions that had Western TV signal. This indicates a first-order effect on directly exposed individuals. We show that this is due to the effects of Western TV on attitudes and value orientations associated with entrepreneurship, particularly independence. We find no indication that the differences in the entrpreneurship incidence of East German regions with and without Western TV disappear. Instead, we find that successive cohorts and descendants of directly exposed individuals who were not directly exposed themselves more frequently wish to become entrepreneurs. The latter findings are consistent with second-order effects due to intergenerational transmission of an entrepreneurial mindset and suggest that a self-sustaining entrepreneurial culture can be formed. This can cause long-lasting differences between treated and non-treated population groups or regions.