The deadweight gain of insurance taxation when risky activities are optional

David de Meza and Gang Xie

Journal of Public Economics, 2014, vol. 115, issue C, 109-116

Abstract: 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 deadweight 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.

Keywords: Insurance; Tax; Deadweight gain; Hidden types (search for similar items in EconPapers)
JEL-codes: D62 D82 G22 H21 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:pubeco:v:115:y:2014:i:c:p:109-116

DOI: 10.1016/j.jpubeco.2014.02.004

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