Faculty of Economics and Business Administration Publications Database

Participation following sudden access

Volume: 117
Pages: 671 - 688
Month: January
ISSN-Print: 0304-3932
Link External Source: Online Version
Year: 2021

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.