Local Bias and Adoption Patterns of Occupational Pensions in Germany

The withdrawal of the welfare states from pensions underscores the need for a better understanding of the spatial characteristics of adoption processes in the case of financial innovations. In 2001, the German pension reform reduced the publicly provided pensions, and introduced subsidized, voluntary occupational plans to replace the loss in retirement income. This paper looks at the spatial and temporal adoptions of the newly created occupational pensions by analysing a unique, proprietary database, containing data of twelve thousand employers and 286 thousand employees working in the German metal- and electric industry. The study identifies metropolitan/non-metropolitan, East-West, and further geographical differences in the employers' timing to adopt, which in turn influences employees' decisions to enroll. Differences are identified among employee-level adoptions depending on the employers' timing and further, individual-level factors. The results emphasize the importance of local bias in the transformation of old-age finances in the German welfare state