IDEAS home Printed from https://ideas.repec.org/p/zbw/ciwdps/32021.html
   My bibliography  Save this paper

Trust we lost: The Treuhand experience and political behavior in the former German Democratic Republic

Author

Listed:
  • Kellermann, Kim Leonie

Abstract

We study whether the experience of losing one's job due to the Treuhand activities in the early 1990s affected long-term political behavior among citizens of the former German Democratic Republic. During the German Reunification process, the Treuhand coordinated the privatization of former GDR firms at the cost of massive job losses. We exploit individual and spatial variation in Treuhand layoffs between 1990 and 1994, based on micro-level survey data from the German Socio-economic Panel and firm data from the IWH Treuhand Database to examine the effects on various behavioral outcomes in later years. Our results suggest that former GDR citizens who have experienced a Treuhand layoff are significantly more likely to prefer a radical party, are less interested in politics and tend to have less trust in others. At the aggregate level, districts with relatively more layoffs exhibit higher radical left vote shares in federal elections. Investigating the underlying mechanisms, we find that the effects of Treuhand job losses are relatively stronger for respondents who stayed in East Germany after Reunification. Furthermore, it seems to be nostalgia and disappointment with the transition process which drive the effects, rather than financial grievances.

Suggested Citation

  • Kellermann, Kim Leonie, 2021. "Trust we lost: The Treuhand experience and political behavior in the former German Democratic Republic," CIW Discussion Papers 3/2021, University of Münster, Center for Interdisciplinary Economics (CIW).
    • Handle: RePEc:zbw:ciwdps:32021
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/231373/1/1748626817.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Nicola Fuchs-Schündeln & Paolo Masella, 2016. "Long-Lasting Effects of Socialist Education," The Review of Economics and Statistics, MIT Press, vol. 98(3), pages 428-441, July.
    2. Sascha O. Becker & Lukas Mergele & Ludger Woessmann, 2020. "The Separation and Reunification of Germany: Rethinking a Natural Experiment Interpretation of the Enduring Effects of Communism," Journal of Economic Perspectives, American Economic Association, vol. 34(2), pages 143-171, Spring.
    3. Alberto Alesina & Nicola Fuchs-Schundeln, 2005. "Good bye Lenin (or not?): The effect of Communism on people's preferences," Harvard Institute of Economic Research Working Papers 2076, Harvard - Institute of Economic Research.
    4. Sears, David O. & Valentino, Nicholas A., 1997. "Politics Matters: Political Events as Catalysts for Preadult Socialization," American Political Science Review, Cambridge University Press, vol. 91(1), pages 45-65, March.
    5. Leonardo Bursztyn & Davide Cantoni, 2016. "Tear in the Iron Curtain: The Impact of Western Television on Consumption Behavior," The Review of Economics and Statistics, MIT Press, vol. 98(1), pages 25-41, March.
    6. Hans‐Werner Sinn, 2002. "Germany’s Economic Unification: An Assessment after Ten Years," Review of International Economics, Wiley Blackwell, vol. 10(1), pages 113-128, February.
    7. Frederick Solt, 2008. "Economic Inequality and Democratic Political Engagement," American Journal of Political Science, John Wiley & Sons, vol. 52(1), pages 48-60, January.
    8. Cantoni, Davide & Hagemeister, Felix & Westcott, Mark, 2019. "Persistence and Activation of Right-Wing Political Ideology," Rationality and Competition Discussion Paper Series 143, CRC TRR 190 Rationality and Competition.
    9. George A. Akerlof & Andrew K. Rose & Janet L. Yellen & Helga Hessenius, 1991. "East Germany in from the Cold: The Economic Aftermath of Currency Union," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 22(1), pages 1-106.
    10. Paul Frijters & John P. Haisken-DeNew & Michael A. Shields, 2004. "Money Does Matter! Evidence from Increasing Real Income and Life Satisfaction in East Germany Following Reunification," American Economic Review, American Economic Association, vol. 94(3), pages 730-740, June.
    11. Martin Biewen, 2001. "Measuring the Effects of Socio-Economic Variables on the Income Distribution: An Application to the East German Transition Process," The Review of Economics and Statistics, MIT Press, vol. 83(1), pages 185-190, February.
    12. Brady, Henry E. & Verba, Sidney & Schlozman, Kay Lehman, 1995. "Beyond SES: A Resource Model of Political Participation," American Political Science Review, Cambridge University Press, vol. 89(2), pages 271-294, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Hager, Anselm & Hennicke, Moritz & Krause, Werner & Mergele, Lukas, 2021. "Privatizations Spark Socialist Backlash: Evidence from East Germany’s Transformation," OSF Preprints cmsyn, Center for Open Science.
    2. Robert Gold, 2022. "From a better understanding of the drivers of populism to a new political agenda," Working Papers 4, Forum New Economy.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Hyll, Walter & Schneider, Lutz, 2016. "Social Comparisons and Attitudes towards Foreigners. Evidence from the ‘Fall of the Iron Curtain’," IWH Discussion Papers 12/2016, Halle Institute for Economic Research (IWH).
    2. Luis R. Martinez & Jonas Jessen & Guo Xu, 2023. "A Glimpse of Freedom: Allied Occupation and Political Resistance in East Germany," American Economic Journal: Applied Economics, American Economic Association, vol. 15(1), pages 68-106, January.
    3. Nicolas R. Ziebarth & Gert G. Wagner, 2013. "Top-down v. Bottom-up: The Long-Term Impact of Government Ideology and Personal Experience on Values," Discussion Papers of DIW Berlin 1280, DIW Berlin, German Institute for Economic Research.
    4. Ufuk Akcigit & Harun Alp & André Diegmann & Nicolas Serrano-Velarde, 2023. "Committing to Grow: Privatizations and Firm Dynamics in East Germany," Working Papers 685, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    5. Biermann, Philipp & Welsch, Heinz, 2021. "An anatomy of East German unhappiness: The role of circumstances and mentality, 1990–2018," Journal of Economic Behavior & Organization, Elsevier, vol. 181(C), pages 1-18.
    6. Deter, Max & Lange, Martin, 2023. "Are the supporters of socialism the losers of capitalism? Conformism in East Germany and transition success," European Journal of Political Economy, Elsevier, vol. 76(C).
    7. Max Deter, 2020. "Are the Losers of Communism the Winners of Capitalism? The Effects of Conformism in the GDR on Transition Success," SOEPpapers on Multidisciplinary Panel Data Research 1102, DIW Berlin, The German Socio-Economic Panel (SOEP).
    8. Lange, Martin, 2021. "The legacy of state socialism on attitudes toward immigration," Journal of Comparative Economics, Elsevier, vol. 49(3), pages 733-750.
    9. Slavtchev, Viktor & Wyrwich, Michael, 2017. "TV and entrepreneurship," IWH Discussion Papers 17/2017, Halle Institute for Economic Research (IWH).
    10. Hyll, Walter & Schneider, Lutz, 2018. "Income comparisons and attitudes towards foreigners - Evidence from a natural experiment," Journal of Comparative Economics, Elsevier, vol. 46(2), pages 634-655.
    11. Kim Leonie Kellermann, 2022. "Trust We Lost: The Impact of the Treuhand Experience on Political Alienation in East Germany," SOEPpapers on Multidisciplinary Panel Data Research 1175, DIW Berlin, The German Socio-Economic Panel (SOEP).
    12. Wyrwich, Michael & Steinberg, Philip J. & Noseleit, Florian & de Faria, Pedro, 2022. "Is open innovation imprinted on new ventures? The cooperation-inhibiting legacy of authoritarian regimes," Research Policy, Elsevier, vol. 51(1).
    13. Dragone, D. & Ziebarth, N.R., 2015. "Non-Separable Time Preferences and Novelty Consumption: Theory and Evidence from the East German Transition to Capitalism," Health, Econometrics and Data Group (HEDG) Working Papers 15/28, HEDG, c/o Department of Economics, University of York.
    14. Dragone, Davide & Ziebarth, Nicolas R., 2017. "Non-separable time preferences, novelty consumption and body weight: Theory and evidence from the East German transition to capitalism," Journal of Health Economics, Elsevier, vol. 51(C), pages 41-65.
    15. Slavtchev, Viktor & Wyrwich, Michael, 2023. "The effects of TV content on entrepreneurship: Evidence from German unification," Journal of Comparative Economics, Elsevier, vol. 51(2), pages 696-721.
    16. Heineck, Guido & Süssmuth, Bernd, 2013. "A different look at Lenin’s legacy: Social capital and risk taking in the Two Germanies," Journal of Comparative Economics, Elsevier, vol. 41(3), pages 789-803.
    17. Sascha O. Becker & Lukas Mergele & Ludger Woessmann, 2020. "The Separation and Reunification of Germany: Rethinking a Natural Experiment Interpretation of the Enduring Effects of Communism," Journal of Economic Perspectives, American Economic Association, vol. 34(2), pages 143-171, Spring.
    18. Eibich, Peter & Ziebarth, Nicolas, 2014. "Examining the Structure of Spatial Health Effects in Germany Using Hierarchical Bayes Models," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 49, pages 305-320.
    19. 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).
    20. Richard Bluhm & Maxim Pinkovskiy, 2021. "The spread of COVID-19 and the BCG vaccine: A natural experiment in reunified Germany," The Econometrics Journal, Royal Economic Society, vol. 24(3), pages 353-376.

    More about this item

    Keywords

    GDR; trust agency; political behavior; unemployment; radical voting;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zbw:ciwdps:32021. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ZBW - Leibniz Information Centre for Economics (email available below). General contact details of provider: https://edirc.repec.org/data/ilmuede.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.