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Wednesday, October 19, 2005

The Effect of Communism on Preferences

Communism causes a taste for redistribution and for state intervention according to this NBER paper by Alesina and Fuchs-Schuendeln. But it eventually goes away:

Good bye Lenin (or not?): The Effect of Communism on People's Preferences, by Alberto Alesina, Nichola Fuchs Schuendeln, NBER WP 11700, October 2005: 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 further find that East Germans' preferences converge towards those of West Germans. We calculate that it will take one to two generations for preferences to converge completely.  [Free version on author web site, here too.]

    Posted by on Wednesday, October 19, 2005 at 12:33 AM in Economics | Permalink  TrackBack (1)  Comments (1)


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