Germany’s welfare state began as a political project—but its first major reform did not have the effect its architect intended. A new study, Bismarck’s Welfare State and the Socialists, by Felix Kersting examines how the introduction of public health insurance in the 1880s shaped electoral support for the socialist party. The study provides the first quantitative evidence on whether Bismarck’s attempt to counter the rising socialist movement through social policy ultimately strengthened or weakened the challenger.
The central question is straightforward: Did Bismarck’s health insurance reform reduce support for the socialist party, as intended, or did it help the party gain credibility on its core issue? This question matters because it speaks to a deeper political dynamic that is still relevant today—whether governments can adopt a challenger party’s signature policies to undercut its appeal, or whether such strategies backfire when voters view the challenger as the more credible actor.
The study applies a clear conceptual idea from political science: an accommodation strategy, meaning a government adopts policies championed by a challenger party in hopes of reducing its support. For this strategy to succeed, the government must gain “issue ownership”, defined as being seen by voters as the most credible actor on a policy area. Kersting asks whether Bismarck or the socialists gained this ownership once health insurance was introduced.
To answer this, the paper uses detailed historical data on Prussian voting districts, called constituencies. These districts differed in how strongly the 1883 health insurance reform affected them. Before the reform, many workers were already covered by local or industry-based schemes, while others had no insurance at all. This meant that some constituencies gained many newly insured workers, while others gained very few. The author uses this difference to compare political outcomes across districts.
The treatment measure—the share of newly insured workers—comes from combining several sources, including an 1876 firm census and sector-level data on mining and handcrafts. According to the descriptive statistics on page 38, an average of about 5% of the local population became newly insured, with substantial variation across regions. Because this variation is unrelated to immediate political changes, it provides a credible basis to study electoral effects. Voting data from seven Reichstag elections between 1874 and 1890 allow the study to trace how electoral support changed over time.
The results are clear. Constituencies with more newly insured workers showed larger gains for the socialist party after the reform. The effect was substantial—large enough to explain most of the increase in socialist votes between the 1881 and 1884 elections. As shown in the event-study figure on page 17, these gains appear immediately once the reform was announced and remain stable in subsequent elections. Bismarck’s own coalition—the conservatives and national liberals—lost vote shares in the same areas. This indicates that the reform strengthened the socialists politically rather than weakening them.
The study also explores why the reform had this effect. Historical evidence suggests that the socialist party responded by adopting a more reform-oriented stance, moving away from radical positions and investing heavily in worker-run insurance funds. These activities helped the party retain credibility on social reform. At the same time, the mechanisms analysis shows that radical agitation, local economic shifts, migration, wages, or employment changes cannot explain the vote gains. This supports the interpretation that credibility and issue ownership played a central role.
This historical case suggests that adopting a challenger’s core issue does not necessarily weaken the challenger—especially when voters view it as the more credible advocate.
About the Author
Felix Kersting
Researcher at Humboldt-Universität zu Berlin, a research associate at the Berlin School of Economics, and research affiliate in the Economic History Programme of CEPR. His research lies at the intersection of economic history and political economy, with a focus on two main areas: social conflict and structural change. In his work on social conflict, he investigates the labor movement and nationalism. His research on structural change explores how major economic shocks—such as industrialization and the first wave of globalization—reshaped the distribution of wealth and labor across society.
