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The Long-Term Costs of Government Surveillance: Insights from Stasi Spying in East Germany

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  • Siegloch, Sebastian
  • Lichter, Andreas
  • Löffler, Max

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 number of spies in the 1980s, we exploit discontinuities at state borders to show that higher levels of government surveillance led to lower levels of interpersonal and institutional trust in post-reunification Germany. Based on a second identification strategy that accounts for county fixed effects we further estimate the economic costs of spying. We find that a more intense surveillance 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 East German state surveillance are large and persistent.

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  • Siegloch, Sebastian & Lichter, Andreas & Löffler, Max, 2016. "The Long-Term Costs of Government Surveillance: Insights from Stasi Spying in East Germany," Annual Conference 2016 (Augsburg): Demographic Change 145656, Verein für Socialpolitik / German Economic Association.
  • Handle: RePEc:zbw:vfsc16:145656
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    1. Bai, Liang & Wu, Lingwei, 2020. "Political movement and trust formation: Evidence from the Cultural Revolution (1966–76)," European Economic Review, Elsevier, vol. 122(C).
    2. Uwe Jirjahn & Cornelia Chadi, 2020. "Out-of-partnership births in East and West Germany," Review of Economics of the Household, Springer, vol. 18(3), pages 853-881, September.
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    7. Chadi, Cornelia & Jirjahn, Uwe, 2019. "Does Society Influence the Gender Gap in Risk Attitudes? Evidence from East and West Germany," GLO Discussion Paper Series 311, Global Labor Organization (GLO).
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    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-
    • P26 - Economic Systems - - Socialist Systems and Transition Economies - - - Political Economy

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