Who Responds to Tax Reforms? Evidence from the Life Insurance Market

Geneva Papers on Risk and Insurance - Issues and Practice, Vol. 37, No. 1, pp. 5-26, 2012

35 Pages Posted: 7 Jul 2010 Last revised: 11 Jan 2012

See all articles by Carolin Hecht

Carolin Hecht

affiliation not provided to SSRN

Katja Hanewald

UNSW Sydney - School of Risk & Actuarial Studies and ARC Centre of Excellence in Population Ageing Research (CEPAR)

Date Written: June 22, 2011

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.

Keywords: Life Insurance Demand, Tax Incentives, Financial Literacy

JEL Classification: D12, D14, D91, G22, K34

Suggested Citation

Hecht, Carolin and Hanewald, Katja, Who Responds to Tax Reforms? Evidence from the Life Insurance Market (June 22, 2011). Geneva Papers on Risk and Insurance - Issues and Practice, Vol. 37, No. 1, pp. 5-26, 2012, Available at SSRN: https://ssrn.com/abstract=1635309

Carolin Hecht

affiliation not provided to SSRN ( email )

Katja Hanewald (Contact Author)

UNSW Sydney - School of Risk & Actuarial Studies and ARC Centre of Excellence in Population Ageing Research (CEPAR) ( email )

School of Risk & Actuarial Studies
UNSW Sydney
Sydney, New South Wales NSW 2052
Australia

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
81
Abstract Views
816
rank
332,974
PlumX Metrics