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The Economic Costs of Mass Surveillance: Insights from Stasi Spying in East Germany

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  • Lichter, Andreas

    () (Heinrich Heine University Düsseldorf)

  • Loeffler, Max

    () (University of Cologne)

  • Siegloch, Sebastian

    () (University of Mannheim)

Abstract

Based on official records from the former East German Ministry for State Security, we quantify the long-term costs of state surveillance on social capital and economic performance. Using county-level variation in the spy density in the 1980s, we exploit discontinuities at state borders to show that higher levels of Stasi surveillance led to lower levels of social capital as measured by interpersonal and institutional trust in post-reunification Germany. We estimate the economic costs of spying by applying a second identification strategy that accounts for county fixed effects. We find that a higher spy density caused lower self-employment rates, fewer patents per capita, higher unemployment rates and larger population losses throughout the 1990s and 2000s. Overall, our results suggest that the social and economic costs of state surveillance are large and persistent.

Suggested Citation

  • Lichter, Andreas & Loeffler, Max & Siegloch, Sebastian, 2015. "The Economic Costs of Mass Surveillance: Insights from Stasi Spying in East Germany," IZA Discussion Papers 9245, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp9245
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    Cited by:

    1. Jirjahn, Uwe & Struewing, Cornelia, 2019. "Out-Of-Partnership Births in East and West Germany," IZA Discussion Papers 12234, Institute of Labor Economics (IZA).
    2. Nikolova, Milena & Popova, Olga & Otrachshenko, Vladimir, 2019. "Stalin and the Origins of Mistrust," IZA Discussion Papers 12326, Institute of Labor Economics (IZA).
    3. Goldfayn-Frank, Olga & Wohlfart, Johannes, 2018. "How do consumers adapt to a new environment in their economic forecasting? Evidence from the German reunification," IMFS Working Paper Series 129, Goethe University Frankfurt, Institute for Monetary and Financial Stability (IMFS).
    4. Chadi, Cornelia & Jirjahn, Uwe, 2019. "Does Society Influence the Gender Gap in Risk Attitudes? Evidence from East and West Germany," IZA Discussion Papers 12100, Institute of Labor Economics (IZA).
    5. Buhlmann, Florian & Elsner, Benjamin & Peichl, Andreas, 2018. "Tax refunds and income manipulation: evidence from the EITC," Munich Reprints in Economics 62847, University of Munich, Department of Economics.
    6. Florian Buhlmann & Benjamin Elsner & Andreas Peichl, 2018. "Tax refunds and income manipulation: evidence from the EITC," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 25(6), pages 1490-1518, December.
    7. repec:eee:eecrev:v:103:y:2018:i:c:p:83-107 is not listed on IDEAS
    8. Glitz, Albrecht & Meyersson, Erik, 2017. "Industrial Espionage and Productivity," IZA Discussion Papers 10816, Institute of Labor Economics (IZA).
    9. Xue, Melanie Meng & Koyama, Mark, 2018. "Autocratic Rule and Social Capital: Evidence from Imperial China," MPRA Paper 84249, University Library of Munich, Germany.
    10. Berggren, Niclas & Ljunge, Martin & Nilsson, Therese, 2019. "Roots of Tolerance among Second-generation Immigrants," Working Paper Series 1282, Research Institute of Industrial Economics.
    11. repec:cog:poango:v:6:y:2018:i:4:p:159-167 is not listed on IDEAS
    12. AndreasLichter & MaxLöffler & Sebastian Siegloch, 2016. "Der lange Schatten der Stasi-Überwachung," ifo Dresden berichtet, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 23(05), pages 08-14, October.
    13. Eder, Christoph & Halla, Martin, 2018. "On the Origin and Composition of the German East-West Population Gap," IZA Discussion Papers 12031, Institute of Labor Economics (IZA).
    14. repec:eee:wdevel:v:109:y:2018:i:c:p:249-260 is not listed on IDEAS
    15. Christoph Eder & Martin Halla, 2018. "On the Origin of the German East-West Population Gap," Economics working papers 2018-17, Department of Economics, Johannes Kepler University Linz, Austria.
    16. repec:liu:liucej:v:15:y:2018:i:2:p:197-229 is not listed on IDEAS
    17. Uwe Jirjahn, Cornelia Struewing, 2018. "Single Motherhood in East and West Germany: What Can Explain the Differences?," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 15(2), pages 197-229, December.

    More about this item

    JEL classification:

    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • N34 - Economic History - - Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy - - - Europe: 1913-
    • N44 - Economic History - - Government, War, Law, International Relations, and Regulation - - - Europe: 1913-
    • P26 - Economic Systems - - Socialist Systems and Transition Economies - - - Political Economy

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