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Suicide and Life Insurance

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  • Joe Chen

    (Faculty of Economics, University of Tokyo)

  • Yun Jeong Choi

    (Faculty of Economics, University of Tokyo)

  • Yasuyuki Sawada

    (Faculty of Economics, University of Tokyo)

Abstract

In this paper, we investigate the nexus between life insurance and suicide behavior using OECD cross-country data from 1980 to 2002. Through semiparametric instrumental variable regressions with fixed effects, we find that for the majority of observations, there exists a positive relationship between suicide rate and life insurance density (premium per capita). Since life insurance policies pay death benefits even in suicide cases after the suicide exemption period, the presence of adverse selection and moral hazard suggests an incentive effect that leads to this positive relationship. The novelty of our analysis lies in the use of cross-country variations in the length of the suicide exemption period in life insurance policies as the identifying instrument for life insurance density. Our results provide compelling evidence suggesting the existence of adverse selection and moral hazards in life insurance markets in OECD countries.

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File URL: http://www.cirje.e.u-tokyo.ac.jp/research/dp/2008/2008cf558.pdf
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Bibliographic Info

Paper provided by CIRJE, Faculty of Economics, University of Tokyo in its series CIRJE F-Series with number CIRJE-F-558.

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Length: 22 pages
Date of creation: Apr 2008
Date of revision:
Handle: RePEc:tky:fseres:2008cf558

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  1. Hamermesh, Daniel S & Soss, Neal M, 1974. "An Economic Theory of Suicide," Journal of Political Economy, University of Chicago Press, vol. 82(1), pages 83-98, Jan.-Feb..
  2. Tomas Philipson & John Cawley, 1999. "An Empirical Examination of Information Barriers to Trade in Insurance," American Economic Review, American Economic Association, vol. 89(4), pages 827-846, September.
  3. Villeneuve, Bertrand, 2000. "Life Insurance," Economics Papers from University Paris Dauphine 123456789/5369, Paris Dauphine University.
  4. Richard Blundell & Alan Duncan & Krishna Pendakur, 1998. "Semiparametric estimation and consumer demand," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 13(5), pages 435-461.
  5. Yatchew, A., 1997. "An elementary estimator of the partial linear model," Economics Letters, Elsevier, vol. 57(2), pages 135-143, December.
  6. Michael Lokshin, 2006. "Difference-based semiparametric estimation of partial linear regression models," Stata Journal, StataCorp LP, vol. 6(3), pages 377-383, September.
  7. Ping Zhang & Arthur van Soest & Xiaodong Gong, 2005. "The effects of the gender of children on expenditure patterns in rural China: a semiparametric analysis," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 20(4), pages 509-527.
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Cited by:
  1. Yip, Paul S.F. & Chen, Feng, 2014. "A study on the effect of exclusion period on the suicidal risk among the insured," Social Science & Medicine, Elsevier, vol. 110(C), pages 26-30.

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