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

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  • Andreas Lichter
  • Max Löffler
  • Sebastian Siegloch

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 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.

Suggested Citation

  • Andreas Lichter & Max Löffler & Sebastian Siegloch, 2021. "The Long-Term Costs of Government Surveillance: Insights from Stasi Spying in East Germany," Journal of the European Economic Association, European Economic Association, vol. 19(2), pages 741-789.
    • Handle: RePEc:oup:jeurec:v:19:y:2021:i:2:p:741-789.
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    JEL classification:

    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • N34 - Economic History - - Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy - - - Europe: 1913-
    • N44 - Economic History - - Government, War, Law, International Relations, and Regulation - - - Europe: 1913-
    • P20 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - General

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