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Goodbye Lenin (or Not?): The Effect of Communism on People


  • Alberto Alesina
  • Nicola Fuchs-Schündeln


Preferences for redistribution, as well as the generosity of welfare states, differ significantly across countries. This paper tests whether there exists a feedback process of the economic regime on individual preferences. We exploit the experiment of German separation and reunification to establish exogeneity of the economic system. We find that, after German reunification, East Germans are more in favor of state intervention than West Germans. This effect is especially strong for older cohorts. We further find that East Germans' preferences converge toward those of West Germans. It will take one to two generations for preferences to converge completely. (JEL D12, D72, H11, H23, P26)

Suggested Citation

  • Alberto Alesina & Nicola Fuchs-Schündeln, 2007. "Goodbye Lenin (or Not?): The Effect of Communism on People," American Economic Review, American Economic Association, vol. 97(4), pages 1507-1528, September.
  • Handle: RePEc:aea:aecrev:v:97:y:2007:i:4:p:1507-1528 Note: DOI: 10.1257/aer.97.4.1507

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    References listed on IDEAS

    1. Jonathan A. Parker & Christian Julliard, 2005. "Consumption Risk and the Cross Section of Expected Returns," Journal of Political Economy, University of Chicago Press, vol. 113(1), pages 185-222, February.
    2. Hansen, Lars Peter & Jagannathan, Ravi, 1991. "Implications of Security Market Data for Models of Dynamic Economies," Journal of Political Economy, University of Chicago Press, vol. 99(2), pages 225-262, April.
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    4. tom krebs, 2004. "welfare cost of business cycles when markets are incomplete," Econometric Society 2004 North American Summer Meetings 283, Econometric Society.
    5. Beaudry, Paul & DiNardo, John, 1991. "The Effect of Implicit Contracts on the Movement of Wages over the Business Cycle: Evidence from Micro Data," Journal of Political Economy, University of Chicago Press, vol. 99(4), pages 665-688, August.
    6. Ricardo Reis, 2009. "The Time-Series Properties of Aggregate Consumption: Implications for the Costs of Fluctuations," Journal of the European Economic Association, MIT Press, vol. 7(4), pages 722-753, June.
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    10. Bils, Mark J, 1985. "Real Wages over the Business Cycle: Evidence from Panel Data," Journal of Political Economy, University of Chicago Press, vol. 93(4), pages 666-689, August.
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    12. Storesletten, Kjetil & Telmer, Chris I. & Yaron, Amir, 2001. "The welfare cost of business cycles revisited: Finite lives and cyclical variation in idiosyncratic risk," European Economic Review, Elsevier, vol. 45(7), pages 1311-1339.
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    More about this item

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • P26 - Economic Systems - - Socialist Systems and Transition Economies - - - Political Economy


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