Tobias A. Jopp

Old Times, Better Times? German Miners’ Knappschaften, Pay-as-you-go Pensions, and Implicit Rates of Return, 1854–1913

This paper contributes to the literature on the weakness of modern pay-as-yougo social security systems in financing pensions by taking a business and economic historical perspective on the issue. It focuses on Prussian Knappschaften (plural of Knappschaft), which provided miners with compulsory invalidity and implicit old-age insurance, and studies the period from 1854 to 1913. Knappschaften used the pay-asyou-go mechanism, and, in the long-term, came under financial pressure by the rising number of pensioners. The question to be answered is whether Knappschaften were able to offer cohorts of miners entering the system at different times the same implicit rates of return. Did Knappschaften provide an intergenerationally sustainable policy, or did adjustments of contributions and other parameters decrease the dividend for insured miners over time?

After Us, the Deluge: German Miners’ Experience with Pay‐As‐You‐Go Pensions and the Intergenerational Contract Before the Great Inflation

Many public pension insurance schemes today use the pay‐as‐you‐go financing mechanism. This mechanism is vulnerable to an ageing population, which puts pressure on the intergenerational contract implicit in these schemes and raises the question as to how they might be eroded. This is not a new problem, and to put it into historical perspective, this article studies the intergenerational contract that formed the core of the Prussian miners’ invalidity insurance in the nineteenth and the early twentieth century (1861–1920). With the so‐called Knappschaften, miners relied on what was probably the most comprehensive and advanced occupational pension system existing in Germany around the time when Bismarckian social insurance was established. Financed via the pay‐as‐you‐go mechanism, the miners’ pension funds faced stress from their ageing memberships early on, and this potentially undermined their ability to maintain intergenerationally fair pensions. In order to examine whether or not the intergenerational contract among German miners showed signs of erosion, we look at the Knappschaftens’ profitability, as measured by actual and promised internal rates of return. This article shows that the intergenerational contract indeed weakened over time unless miners’ funds were large and continued to grow, and that a pension reform in 1906 served to stabilize generosity.

How did the Capital Market Evaluate Germany’s Prospects for Winning World War I? Evidence from the Amsterdam Market for Government Bonds

Abstract This study uses prices for the German 3 percent imperial loan issued in several tranches since 1890 and still traded during World War I to measure capital market players’ real-time perceptions of the prospects for Germany as the war proceeded. Price data are gathered from the Amsterdam market for government bonds; the Netherlands remained neutral throughout war. Focusing on the window from August 24th 1915 to August 11th 1919, ten (twelve) turning points are identified in a baseline (extended) model. Each implies a significant adjustment of lenders’ confidence in Germany being able, or willing, to service its debts in the future. Two turning points stand out. In early January 1916, the price plummeted by 14.3 percent between the first and eleventh of the month, which was most likely due to the Military Service Act discussed in the British parliament. On September 19th 1918, the price dropped by 17.5 percent compared to the last available price quote from the end of July. This coincides with the Allied Powers’ revival on all fronts since the summer, leading to the ultimate collapse of the German lines.

The Hazard of Merger by Absorption - Why Some Knappschaften Merged and Others Did Not: 1861-1920

By the mid-19th century, following the Prussian mining reform, German miners‘ combined mutual health and pension funds took on the characteristics of social insurance and underwent a concentration process driven by mergers, liquidations, and unequal internal growth. This paper investigates the determinants of mergers by absorption among Prussian funds combined with quantitative evidence from a regression model, provides new insights into the first social-insurance merger wave in Germany. While most contemporary sources convey the impression that funds were merged to stabilize the entire insurance scheme by sorting out actuarially unviable and financially distressed funds, statistical evidence suggests that funds were absorbed over time primarily because they offered advantages to the absorbing fund and, hence, were quite attractive targets.

How Does the Public Perceive Alliances

Abstract World War I was fought by numerous countries siding together as the Central Powers and, respectively, the Allied Powers. The former began with the German Empire and Austria-Hungary and grew to four allies when the Ottoman Empire entered the scene in late 1914 and Bulgaria in late 1915; the latter centred on the alliance between England, France, and Russia and was informally extended to many more countries as they entered into the war ad-hoc by signalling common interests with the core Allied Powers. This article addresses a neglected dimension of the alliance formation phenomenon, namely how alliances were perceived by the public, in contrast to the perceptions of political and military leaders. Were the Central and Allied Powers perceived to be credible alliances – monolithic blocks – in the eyes of contemporaries? We seek to determine the degree of “alliance integration” among pairs of countries by applying cointegration analysis based on prices for securities. It is assumed that the prices of countries perceived as “integrated” should show signs of co-movement. In particular, we focus on the Amsterdam market for foreign government bonds providing us with a neutral perspective. Our analysis is based on the yields for representative bonds traded by 13 belligerent countries not only during the war, but also before and after. Among other findings, we cannot corroborate that investors simply recognized two monolithic blocks fighting the war against each other.

Did closures do any good? Labour productivity, mine dynamics, and rationalization in interwar Ruhr coal-mining

Over the later 1920s and up to the mid-1930s, German coal-mining saw an exceptional surge in labour productivity led primarily by the Ruhr coalminesO performance. It is a commonly accepted view that the economy-wide Orationalization boomO between currency stabilization and the depression years explains that pattern. We test the related hypothesis that Onegative rationalizationO in the form of a massive wave of mine closures over 1924-29 played a significant role in pushing aggregate labour productivity in the Ruhr coal district up to new levels. Based on an original dataset on the population of Ruhr coalmines, the sources of productivity change over the extended period 1913-38 are identified using the decomposition method of Foster, Haltiwanger and Krizan (2001). Results suggest that labour productivity in Ruhr coal-mining was driven to a large extent by improvements at individual mines attributable to the intensified mechanization of underground operations. Closures regularly raised aggregate productivity in the year after the closure had been conducted; closures also pushed productivity by way of ceding resources to high(er) productivity surviving mines over gradual shut-down. However, on the whole, turnover-effects were marginal compared to the effects stemming from the producer dynamics among surviving mines. Thus, the practical productivity implications of mine closures over the rationalization boom are negligible and still overrated in the relevant literature. These findings call for testing more rigorously the relative importance of Onegative rationalizationO in the form of plant closures in other branches of the Weimar economy.

How Technologically Progressive Was Germany in the Interwar Period? Evidence on Total Factor Productivity in Coal Mining

The discussion of the rationalization wave in German industry (1924-1929) still lacks proper industry-level estimates of the rate of technological progress. To close part of this gap, this article investigates total factor productivity (TFP) growth in hard coal mining over the extended period 1913-1938. Stochastic Frontier Analysis is applied to a sample of firms from the Ruhr coal district. TFP grew positively overall and specifically from 1924-1929. Surprisingly, however, TFP growth was even faster from 1933-1938, suggesting that the Nazi economy heavily capitalized on the Weimar rationalization movement, the effects of which are usually not traced beyond 1932.