Working Paper: CEPR ID: DP13596
Authors: Nicola Fuchs-Schündeln; Michael Haliassos
Abstract: The German reunification experiment provided sudden access to previously unavailable financial products, supported by knowledgeable practitioners. This setting offers new perspectives on participation, inertia, and product diffusion. Controlling for characteristics, East Germans experienced a jump in securities participation to a level comparable to West Germans’ participation immediately following reunification, and to an even higher level for consumer debt, while exhibiting inertia in previously accessible products. They showed no signs of subsequent retreat. Lower financial resources are the most important characteristic explaining lower East German participation in all asset classes, while expectations and peer effects drive the higher East German debt participation.
Keywords: household finance; financial market participation; inertia; german reunification
JEL Codes: G11; E21; G5
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Sudden access (Y60) | Securities participation (G24) |
| Sudden access (Y60) | Consumer debt participation (G51) |
| Securities participation (G24) | Participation differences attributable to financial resources (I24) |
| Peer income (D31) | Consumer debt participation (G51) |
| Access (Y20) | Participation in new products (O36) |
| Previously available products (Y90) | Gradual reductions in participation (J26) |