Empirical analysis of moral hazard: a study of a vehicle insurance tax reform
AbstractThis 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.
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Bibliographic InfoPaper provided by CTS - Centre for Transport Studies Stockholm (KTH and VTI) in its series Working papers in Transport Economics with number 2013:14.
Length: 46 pages
Date of creation: 19 Sep 2013
Date of revision:
Contact details of provider:
Postal: Centrum för Transportstudier (CTS), Teknikringen 10, 100 44 Stockholm, Sweden
Web page: http://www.kth.se/abe/om_skolan/organisation/centra/cts
Vehicle insurance; Moral hazard; Traffic safety; Tax reform;
Find related papers by JEL classification:
- C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
- C54 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Quantitative Policy Modeling
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
- L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-09-25 (All new papers)
- NEP-CTA-2013-09-25 (Contract Theory & Applications)
- NEP-DCM-2013-09-25 (Discrete Choice Models)
- NEP-EUR-2013-09-25 (Microeconomic European Issues)
- NEP-IAS-2013-09-25 (Insurance Economics)
- NEP-LAM-2013-09-25 (Central & South America)
- NEP-LTV-2013-09-25 (Unemployment, Inequality & Poverty)
- NEP-NEU-2013-09-25 (Neuroeconomics)
- NEP-PBE-2013-09-25 (Public Economics)
- NEP-TRE-2013-09-25 (Transport Economics)
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