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The deadweight gain of insurance taxation when risky activities are optional

de Meza, David ORCID: 0000-0002-5638-8310 and Xie, Gang (2014) The deadweight gain of insurance taxation when risky activities are optional. Journal of Public Economics, 115. pp. 109-116. ISSN 0047-2727

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Identification Number: 10.1016/j.jpubeco.2014.02.004


Some risky activities are optional, for example motoring. Participation in them is most attractive for good risks, creating a tendency for advantageous selection in the associated insurance market. Taxing insurance consequently yields e¢ ciency gains when type is hidden. Results are strengthened if optimism is present. Finally, endogenising participation implies that the standard "positive correlation" test for the presence of policy relevant asymmetric information may fail.

Item Type: Article
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Additional Information: © 2014 Elsevier B.V.
Divisions: Management
Subjects: H Social Sciences > HD Industries. Land use. Labor
JEL classification: D - Microeconomics > D6 - Welfare Economics > D62 - Externalities
D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D82 - Asymmetric and Private Information
G - Financial Economics > G2 - Financial Institutions and Services > G22 - Insurance; Insurance Companies
H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H21 - Efficiency; Optimal Taxation
Date Deposited: 08 Feb 2016 12:02
Last Modified: 16 May 2024 01:57

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