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The legacy effect of socialism on risky savings

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  • Michael Neugart

Abstract

The riskiness of individuals’ saving behaviour affects their old-age wealth and has wider-ranging implications for macroeconomic development and stability. To which extent individuals take financial risks depends on their preferences, which may be moulded by the economic system they live in. I analyse households’ financial risk taking after the collapse of the German Democratic Republic. Conditional on their income and financial wealth positions, East German households were more prone to financial risk taking than West German households after reunification. The differences in risk taking were quantitatively relevant shortly after reunification and gradually vanished until 2008. Risk taking of households who were exposed to the socialist system longer was higher.

Suggested Citation

  • Michael Neugart, 2021. "The legacy effect of socialism on risky savings," Applied Economics, Taylor & Francis Journals, vol. 53(33), pages 3810-3831, July.
    • Handle: RePEc:taf:applec:v:53:y:2021:i:33:p:3810-3831
    DOI: 10.1080/00036846.2021.1887448
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