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Does Social Security crowd out Private Savings? The Case of Bismarck’s System of Social Insurance

Listed author(s):
  • Lehmann-Hasemeyer, Sibylle
  • Streb, Jochen
Registered author(s):

    Imperial chancellor Bismarck’s system of social insurance (with its three pillars health, accident and pension insurance) was an important role model for social security systems across Europe and in the US. How the introduction of the German system changed economic expectations and decisions of the German workforce has not been researched, though. This article closes this gap by analyzing the development of Prussian savings banks’ deposits in the late 19th century with the help of a difference-in-difference-like approach. We show that, in the Prussian case, social security crowded out private savings considerably. As counterfactual voluntary savings would have been far from sufficient, however, Bismarck’s social insurance system was still needed to fight the misery workers and their families potentially faced in old age or times of sickness.

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    File URL: https://www.econstor.eu/bitstream/10419/162212/1/IBF_Paper_Series-6_17.pdf
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    Paper provided by IBF – Institut für Bank- und Finanzgeschichte / Institute for Banking and Financial History, Frankfurt am Main in its series IBF Paper Series with number 06-17.

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    Date of creation: 2017
    Handle: RePEc:zbw:ibfpps:0617
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    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. Dotsey, Michael & Li, Wenli & Yang, Fang, 2015. "Home production and Social Security reform," European Economic Review, Elsevier, vol. 73(C), pages 131-150.
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    4. Guinnane, Timothy W. & Streb, Jochen, 2015. "Incentives That (Could Have) Saved Lives: Government Regulation of Accident Insurance Associations in Germany, 1884–1914," The Journal of Economic History, Cambridge University Press, vol. 75(04), pages 1196-1227, December.
    5. Lehmann, Sibylle & Streb, Jochen, 2015. "The Berlin Stock Exchange in Imperial Germany – a Market for New Technology?," CEPR Discussion Papers 10558, C.E.P.R. Discussion Papers.
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    8. Tobias A. Jopp, 2016. "After us, the deluge: German miners’ experience with pay-as-you-go pensions and the intergenerational contract before the great inflation," Economic History Review, Economic History Society, vol. 69(3), pages 972-998, August.
    9. Sibylle H. Lehmann, 2014. "Taking firms to the stock market: IPOs and the importance of large banks in imperial Germany, 1896–1913," Economic History Review, Economic History Society, vol. 67(1), pages 92-122, February.
    10. 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.
    11. David M. Cutler & Jonathan Gruber, 1996. "Does Public Insurance Crowd out Private Insurance?," The Quarterly Journal of Economics, Oxford University Press, vol. 111(2), pages 391-430.
    12. Feldstein, Martin & Liebman, Jeffrey B., 2002. "Social security," Handbook of Public Economics,in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 4, chapter 32, pages 2245-2324 Elsevier.
    13. Jopp, Tobias Alexander, 2012. "Insurance, size and exposure to actuarial risk: empirical evidence from nineteenth- and early twentieth-century German Knappschaften," Financial History Review, Cambridge University Press, vol. 19(01), pages 75-116, April.
    14. Orazio P. Attanasio & Susann Rohwedder, 2003. "Pension Wealth and Household Saving: Evidence from Pension Reforms in the United Kingdom," American Economic Review, American Economic Association, vol. 93(5), pages 1499-1521, December.
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    18. Tobias A. Jopp, 2011. "Old times, better times? German miners' Knappschaften , pay-as-you-go pensions, and implicit rates of return, 1854--1913," Business History, Taylor & Francis Journals, vol. 53(7), pages 1018-1043, December.
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    20. repec:zbw:rwirep:0238 is not listed on IDEAS
    21. Guinnane, Timothy W., 2001. "Cooperatives As Information Machines: German Rural Credit Cooperatives, 1883 1914," The Journal of Economic History, Cambridge University Press, vol. 61(02), pages 366-389, June.
    22. Feldstein, Martin S, 1974. "Social Security, Induced Retirement, and Aggregate Capital Accumulation," Journal of Political Economy, University of Chicago Press, vol. 82(5), pages 905-926, Sept./Oct.
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    24. repec:kap:jecgro:v:22:y:2017:i:2:d:10.1007_s10887-017-9141-3 is not listed on IDEAS
    25. Martin Feldstein & Horst Siebert, 2002. "Social Security Pension Reform in Europe," NBER Books, National Bureau of Economic Research, Inc, number feld02-2, November.
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