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Empirical analysis of moral hazard: a study of a vehicle insurance tax reform

Sherzod Yarmukhamedov ()
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Sherzod Yarmukhamedov: VTI, Postal: Centrum för Transportstudier (CTS), Teknikringen 10, 100 44 Stockholm, Sweden

No 2013:14, Working papers in Transport Economics from CTS - Centre for Transport Studies Stockholm (KTH and VTI)

Abstract: This paper uses discrete choice and count data models to analyze the effects of a tax on vehicle insurance levied in Sweden in 2007. The analysis is based on a large set of micro-level panel data on individual insurance holders at the largest insurance company in Sweden for the period 2006-2010. Two questions are addressed: How did the tax reform influence the choice of insurance coverage, and how did changes in coverage affect the incidence of claims? The results show that, on average, the tax reform increased the odds of choosing lower insurance coverage by 47 percent, and that the tax reform had more impact on older drivers. However, switching to lower coverage due to the tax reform has not resulted in significant changes in claim distributions, though the incidence of claims decreased by 20 percent for switchers aged 35-44 in the pre-reform period, indicating a mitigation of ex ante moral hazard in vehicle insurance.

Keywords: Vehicle insurance; Moral hazard; Traffic safety; Tax reform (search for similar items in EconPapers)
JEL-codes: C33 C54 D82 H20 L51 (search for similar items in EconPapers)
Pages: 46 pages
Date: 2013-09-19
New Economics Papers: this item is included in nep-cta, nep-dcm, nep-eur, nep-ias, nep-lam, nep-ltv, nep-neu, nep-pbe and nep-tre
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