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Who Responds to Tax Reforms? Evidence from the Life Insurance MarketCarolin Hechtaffiliation not provided to SSRN Katja HanewaldUniversity of New South Wales - ARC Centre of Excellence in Population Ageing Research and School of Risk and Actuarial Studies June 22, 2011 Geneva Papers on Risk and Insurance - Issues and Practice, Vol. 37, No. 1, pp. 5-26, 2012 Abstract: We exploit the natural experiment of the 2005 income tax reform in Germany to study the effects of tax incentives on consumer behavior in life insurance markets. Our empirical analysis of sociodemographic, economic, and psychological household characteristics elicited in the German SAVE study shows that two very different consumer groups buy (endowment) life insurance before and after the tax reform. We find that education plays a central role in reactions to the modified tax environment. Our stylized characterization of “arbitrageur” and “straggler” buyers will assist both life insurance firms and regulatory authorities design effective policies.
Number of Pages in PDF File: 35 Keywords: Life Insurance Demand, Tax Incentives, Financial Literacy JEL Classification: D12, D14, D91, G22, K34 Accepted Paper SeriesDate posted: July 7, 2010 ; Last revised: January 11, 2012Suggested Citation |
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