Abstract
ABSTRACTWe 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 variable 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.
Highlights
Autocracies have been the dominant form of government in human history
The results of our study offer substantial evidence for negative and long-lasting effects of government surveillance on civic capital and economic performance
We analyze the effect of spying on our measures of civic capital and economic performance, applying the border design and combining it with our instrumental variables approach as set up in equations (1) and (2)
Summary
Autocracies have been the dominant form of government in human history. Despite substantial shifts towards more democratic political institutions in recent decades, autocratic regimes still rule in more than a quarter of the countries worldwide (see Figure B.1), accounting for more than one third of the world population (The Economist Intelligence Unit, 2014). The results of our study offer substantial evidence for negative and long-lasting effects of government surveillance on civic capital and economic performance. We find negative effects on self-employment, with entrepreneurial spirit being one likely channel linking trust and economic performance (Knack and Keefer, 1997) We corroborate these estimates using administrative wage and turnout data at the regional level. We further break new ground by studying the long-term effects of repression in autocratic regimes, in our context state surveillance, on social behavior and economic performance. A second paper by Friehe et al (2015), pursued simultaneously but independently from our project, investigates the effects of Stasi surveillance on personality traits While both studies document negative effects of government surveillance, which can be partly reconciled with our findings, we suggest a novel identification strategy which explicitly addresses the non-randomness of the county-level surveillance density.
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