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Good bye Lenin (or not?): The effect of Communism on people's preferences

Author

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  • Alberto Alesina
  • Nicola Fuchs-Schundeln
Abstract
Preferences for redistribution, as well as the generosities of welfare states, differ significantly across countries. In this paper, we test whether there exists a feedback process of the economic regime on individual preferences. We exploit the experiment of German separation and reunification to establish exogeneity of the economic system. From 1945 to 1990, East Germans lived under a Communist regime with heavy state intervention and extensive redistribution. We find that, after German reunification, East Germans are more in favor of redistribution and state intervention than West Germans, even after controlling for economic incentives. This effect is especially strong for older cohorts, who lived under Communism for a longer time period. We find that East Germans’ preferences converge towards those of West Germans, and we calculate that it will take one to two generations for preferences to converge completely.

Suggested Citation

  • 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.
    • Handle: RePEc:fth:harver:2076
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    More about this item

    JEL classification:

    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook

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