Incentives That Saved Lives: Government Regulation of Accident Insurance Associations in Germany, 1884-1914
AbstractThe German government introduced compulsory accident insurance for industrial firms in 1884. This insurance scheme was one of the main pillars of Bismarck's famous social insurance system. The accident-insurance system achieved only one of its intended goals: it successfully compensated workers and their survivors for losses due to accidents. The accident-insurance system was less successful in limiting the growth of work-related accidents, although that goal had been a reason for the system's creation. We trace the failure to stem the growth of accidents to faulty incentives built into the 1884 legislation. The law created mutual insurance groups that used an experience-rating system that stressed group rather than firm experience, leaving firms with little hope of saving on insurance contributions by improving the safety of their own plants. The government regulator increasingly stressed the imposition of safety rules that would force all firms to adopt certain safety practices. Econometric analysis shows that even the flawed tools available to the insurance groups were powerful, and that more consistent use would have reduced industrial accidents earlier and more extensively.
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Bibliographic InfoPaper provided by Yale University, Department of Economics in its series Working Papers with number 104.
Date of creation: Aug 2012
Date of revision:
Other versions of this item:
- Timothy Guinnane & Jochen Streb, 2012. "Incentives that Saved Lives: Government Regulation of Accident Insurance Associations in Germany, 1884–1914," Ruhr Economic Papers 0364, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
- Timothy W. Guinnane & Jochen Streb, 2012. "Incentives that saved lives: Government regulation of accident insurance associations in Germany, 1884-1914," Working Papers 1013, Economic Growth Center, Yale University.
- G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies
- H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
- N33 - Economic History - - Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy - - - Europe: Pre-1913
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-11-17 (All new papers)
- NEP-HEA-2012-11-17 (Health Economics)
- NEP-HIS-2012-11-17 (Business, Economic & Financial History)
- NEP-IAS-2012-11-17 (Insurance Economics)
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- Timothy W. Guinnane & Jochen Streb, 2010.
"Moral Hazard in a Mutual Health-Insurance System: German Knappschaften, 1867–1914,"
Ruhr Economic Papers
0163, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
- Guinnane, Timothy W. & Streb, Jochen, 2011. "Moral Hazard in a Mutual Health Insurance System: German Knappschaften, 1867–1914," The Journal of Economic History, Cambridge University Press, vol. 71(01), pages 70-104, March.
- Timothy W. Guinnane & Jochen Streb, 2009. "Moral hazard in a mutual health-insurance system: German Knappschaften, 1867-1914," Working Papers 978, Economic Growth Center, Yale University.
- Guinnane, Timothy & Streb, Jochen, 2009. "Moral Hazard in a Mutual Health-Insurance System: German Knappschaften, 1867-1914," Working Papers 70, Yale University, Department of Economics.
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