ARTICLES

Welfare State and Labor Mobility: The Impact of Bismarck's Social Legislation on German Emigration before World War I

DAVID KHOUDOUR-CASTÉRAS^a1

^a1 Professor of Economics, Universidad Externado de Colombia, Facultad de Finanzas, Gobierno y Relaciones Internacionales, Carrera 1 No. 12-66, Bogotá, Colombia. E-mail: david.khoudour@uexternado.edu.co.

Abstract

The rapid decline of German emigration before World War I constitutes a puzzle that traditional explanations have difficulty in solving. The article shows that the social legislation implemented by Bismarck during the 1880s—the most developed at the time—played a key role in this process. Indeed, candidates for migration considered not only the gap between “direct wages” (labor earnings) in the United States and Germany, but also the differential in “indirect wages,” that is, social benefits. In that way, Bismarck's insurance system partly offset low wage rates in Germany and furthered the fall of the emigration rate.

O sprecht! warum zogt ihr von dannen?

Das Neckartal hat Wein und Korn;

Der Schwarzwald steht voll finstrer Tannen,

Im Spessart klingt des Ålplers Horn.

Wie wird es in den fremden Wäldern

Euch nach der Heimatberge Grün,

Nach Deutschlands gelben Weizenfeldern,

Nach seinen Rebenhügeln ziehn!

Ferdinand Freiligrath

Footnotes

I am grateful to Marc Flandreau, my Ph.D. advisor at Sciences Po Paris, and Barry Eichengreen, my supervisor at UC Berkeley, for many valuable observations on previous drafts of the article, and also Guillaume Daudin, Béatrice Dedinger, Brad DeLong, Rui Esteves, Clemens Jobst, Peter Lindert, Mathilde Maurel, John Murray, Martha Olney, Kevin O'Rourke, Christina Romer, Emmanuel Saez, and John Tang for very helpful comments. I thank the University of California at Berkeley for hospitality from January 2004 to May 2005, as well as the Fulbright Commission for financial help. Comments on earlier drafts during presentations at the Allied Social Science Associations meeting in Philadelphia (January 2005), at the Economic History Seminar at the University of California, Berkeley (January 2005), at the Social Science History Workshop at Stanford University (April 2005), at the 6th European Historical Economics Society Conference in Istanbul (September 2005), and at the Economic History and Development Seminar at Georgetown University (January 2006) were very useful. So were the suggestions of the editors and three anonymous referees. I finally thank Sebastian Schaefer and Rui Esteves for their crucial help with Goethe's language. The responsibility for errors remains mine.