Suicide and Life Insurance
AbstractIn 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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Bibliographic InfoPaper provided by CIRJE, Faculty of Economics, University of Tokyo in its series CIRJE F-Series with number CIRJE-F-558.
Length: 22 pages
Date of creation: Apr 2008
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This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-04-21 (All new papers)
- NEP-CTA-2008-04-21 (Contract Theory & Applications)
- NEP-HAP-2008-04-21 (Economics of Happiness)
- NEP-HEA-2008-04-21 (Health Economics)
- NEP-IAS-2008-04-21 (Insurance Economics)
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