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

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  • Lehmann-Hasemeyer, Sibylle
  • Streb, Jochen

Abstract

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.

Suggested Citation

  • 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.
  • Handle: RePEc:zbw:ibfpps:0617
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    File URL: https://www.econstor.eu/bitstream/10419/162212/1/IBF_Paper_Series-6_17.pdf
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    References listed on IDEAS

    as
    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. 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.
    3. Jopp, Tobias Alexander, 2011. "Old Times, Better Times? German Miners' Knappschaften, Pay-as-you-go Pensions, and Implicit Rates of Return, 1854–1913," Ruhr Economic Papers 238, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    4. 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.
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    Full references (including those not matched with items on IDEAS)

    More about this item

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • 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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