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

82 Pages Posted: 14 Nov 2019

See all articles by Andreas Lichter

Andreas Lichter

IZA

Max Löffler

University of Cologne

Sebastian Siegloch

IZA Institute of Labor Economics; University of Mannheim - Department of Economics; ZEW – Leibniz Centre for European Economic Research - Corporate Taxation and Public Finance Research; CESifo (Center for Economic Studies and Ifo Institute)

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Date Written: August 2019

Abstract

We investigate the long-run effects of government surveillance on civic capital and economic performance, studying the case of the Stasi in East Germany. Exploiting regional variation in the number of spies and administrative features of the system, we combine a border discontinuity design with an instrumental variables strategy to estimate the long-term, post-reunification effect of government surveillance. We find that a higher spying density led to persistently lower levels of interpersonal and institutional trust in post-reunification Germany. We also find substantial and long-lasting economic effects of Stasi surveillance, resulting in lower income, higher exposure to unemployment, and lower self-employment.

Keywords: civic capital, government surveillance, trust, economic performance, East Germany

JEL Classification: H11, N34, N44, P20

Suggested Citation

Lichter, Andreas and Löffler, Max and Siegloch, Sebastian, The Long-Term Costs of Government Surveillance: Insights from Stasi Spying in East Germany (August 2019). ZEW - Centre for European Economic Research Discussion Paper No. 19-049, Available at SSRN: https://ssrn.com/abstract=3486145 or http://dx.doi.org/10.2139/ssrn.3486145

Andreas Lichter (Contact Author)

IZA ( email )

No Address Available

Max Löffler

University of Cologne ( email )

Albertus-Magnus-Platz
Cologne, 50923
Germany

Sebastian Siegloch

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

University of Mannheim - Department of Economics ( email )

D-68131 Mannheim
Germany

ZEW – Leibniz Centre for European Economic Research - Corporate Taxation and Public Finance Research ( email )

United States

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

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