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Moral Hazard in a Mutual Health Insurance System: German Knappschaften, 1867–1914

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  • Guinnane, Timothy W.
  • Streb, Jochen

Abstract

The Knappschaft was a mutual association through which German miners insured themselves against accident, illness, and old age. The Knappschaft underlies Bismarck's sickness and accident insurance legislation, and thus Germany's system today. This article focuses on moral hazard, which plagued the Knappschaften in the later nineteenth century. Sick pay made it attractive for miners to feign illness that made them unable to work. We outline the moral hazard problem the Knappschaften faced as well as the mechanisms they devised to control it, and then use econometric models to demonstrate that those mechanisms were at best imperfect.

Suggested Citation

  • 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.
  • Handle: RePEc:cup:jechis:v:71:y:2011:i:01:p:70-104_00
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    References listed on IDEAS

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    1. Murray, John E. & Nilsson, Lars, 2007. "Accident risk compensation in late imperial Austria: Wage differentials and social insurance," Explorations in Economic History, Elsevier, vol. 44(4), pages 568-587, October.
    2. Gottlieb, Daniel, 2007. "Asymmetric information in late 19th century cooperative insurance societies," Explorations in Economic History, Elsevier, vol. 44(2), pages 270-292, April.
    3. Emery, J. C. Herbert, 1996. "Risky Business? Nonactuarial Pricing Practices and the Financial Viability of Fraternal Sickness Insurers," Explorations in Economic History, Elsevier, vol. 33(2), pages 195-226, April.
    4. Dhaval Dave & Robert Kaestner, 2009. "Health insurance and ex ante moral hazard: evidence from Medicare," International Journal of Health Economics and Management, Springer, vol. 9(4), pages 367-390, December.
    5. Gerhard Bry, 1960. "Wages in Germany, 1871-1945," NBER Books, National Bureau of Economic Research, Inc, number bry_60-1, August.
    6. Guinnane, Timothy W., 1997. "Regional organizations in the German cooperative banking system in the late 19th century," Research in Economics, Elsevier, vol. 51(3), pages 251-274, September.
    7. Gerhard Bry, 1960. "Introduction to "Wages in Germany, 1871-1945"," NBER Chapters,in: Wages in Germany, 1871-1945, pages 1-13 National Bureau of Economic Research, Inc.
    8. Bentley B. Gilbert, 1965. "The Decay of Nineteenth-Century Provident Institutions and the Coming of Old Age Pensions in Great Britain," Economic History Review, Economic History Society, vol. 17(3), pages 551-563, April.
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    Cited by:

    1. 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.
    2. Timothy W. Guinnane, 2011. "The Historical Fertility Transition: A Guide for Economists," Journal of Economic Literature, American Economic Association, vol. 49(3), pages 589-614, September.
    3. Catarina Goulão & Luca Panaccione, 2015. "Pooling promises with moral hazard," Economics Bulletin, AccessEcon, vol. 35(1), pages 460-465.
    4. Jopp, Tobias Alexander, 2010. "The welfare state evolves: German Knappschaften, 1854 - 1923," FZID Discussion Papers 16-2010, University of Hohenheim, Center for Research on Innovation and Services (FZID).
    5. Elisabeth Bublitz & Michael Wyrwich, 2018. "Technological change and labor market integration," Jena Economic Research Papers 2018-008, Friedrich-Schiller-University Jena.
    6. 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.
    7. repec:zbw:rwirep:0364 is not listed on IDEAS
    8. Jopp, Tobias Alexander, 2011. "Old Times, Better Times? German Miners' Knappschaften, Pay-as-you-go Pensions, and Implicit Rates of Return, 1854–1913," Ruhr Economic Papers 238, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    9. Lehmann-Hasemeyer, Sibylle & Streb, Jochen, 2017. "Does Social Security crowd out Private Savings? The Case of Bismarck’s System of Social Insurance," IBF Paper Series 06-17, IBF – Institut für Bank- und Finanzgeschichte / Institute for Banking and Financial History, Frankfurt am Main.

    More about this item

    JEL classification:

    • N33 - Economic History - - Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy - - - Europe: Pre-1913
    • N43 - Economic History - - Government, War, Law, International Relations, and Regulation - - - Europe: Pre-1913
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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