The legacy effect of socialism on risky savings

Michael Neugart

Applied Economics, 2021, vol. 53, issue 33, 3810-3831

Abstract: The riskiness of individuals’ saving behaviour affects their old-age wealth and has wider-ranging implications for macroeconomic development and stability. To which extent individuals take financial risks depends on their preferences, which may be moulded by the economic system they live in. I analyse households’ financial risk taking after the collapse of the German Democratic Republic. Conditional on their income and financial wealth positions, East German households were more prone to financial risk taking than West German households after reunification. The differences in risk taking were quantitatively relevant shortly after reunification and gradually vanished until 2008. Risk taking of households who were exposed to the socialist system longer was higher.

Date: 2021
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Working Paper: The legacy effect of socialism on risky savings (2021)
Working Paper: The legacy effect of socialism on risky savings (2021)
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DOI: 10.1080/00036846.2021.1887448

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