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Moral Hazard in a Mutual Health Insurance System: German Knappschaften, 1867–1914

Published online by Cambridge University Press:  02 March 2011

Timothy W. Guinnane  and
Jochen Streb
Timothy W. Guinnane*
Affiliation:
Philip Golden Bartlett Professor of Economic History, Department of Economics, Yale University, Box 208269, New Haven, CT 06520-8269. E-mail: [email protected].
Jochen Streb*
Affiliation:
Professor of Economic History, Department of Economics, University of Hohenheim, Schloss, Speisemeistereiflügel, 70599 Stuttgart, Germany. E-mail: [email protected].
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Abstract

The Knappschaft was a mutual association through which German miners insured themselves against accident, illness, and old age. The Knappschaft underlies Bismarck's sickness and accident insurance legislation, and thus Germany's system today. This article focuses on moral hazard, which plagued the Knappschaften in the later nineteenth century. Sick pay made it attractive for miners to feign illness that made them unable to work. We outline the moral hazard problem the Knappschaften faced as well as the mechanisms they devised to control it, and then use econometric models to demonstrate that those mechanisms were at best imperfect.

Type
ARTICLES
Information
The Journal of Economic History , Volume 71 , Issue 1 , March 2011 , pp. 70 - 104
Copyright
Copyright © The Economic History Association 2011

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