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Incentives That Saved Lives: Government Regulation of Accident Insurance Associations in Germany, 1884-1914


  • Guinnane, Timothy

    (Yale University)

  • Streb, Jochen

    (University of Mannheim)


The 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.

Suggested Citation

  • Guinnane, Timothy & Streb, Jochen, 2012. "Incentives That Saved Lives: Government Regulation of Accident Insurance Associations in Germany, 1884-1914," Working Papers 104, Yale University, Department of Economics.
  • Handle: RePEc:ecl:yaleco:104

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    References listed on IDEAS

    1. 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.
    2. Price V. Fishback & Shawn Everett Kantor, 2000. "A Prelude to the Welfare State: The Origins of Workers' Compensation," NBER Books, National Bureau of Economic Research, Inc, number fish00-1, January.
    3. repec:zbw:rwirep:0163 is not listed on IDEAS
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    Cited by:

    1. Stavros A. Drakopoulos & Ioannis Theodossiou, 2016. "Workers’ risk underestimation and occupational health and safety regulation," European Journal of Law and Economics, Springer, vol. 41(3), pages 641-656, June.
    2. 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:

    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • 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

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