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Tax incentives and the demand for life insurance: evidence from Italy

  • Jappelli, Tullio
  • Pistaferri, Luigi

The theoretical literature suggests that taxation can have a large impact on household portfolio selection and allocation. In this paper we consider the tax treatment of life insurance, considering the cancellation of tax incentives in Italian life insurance contracts for investors with high marginal tax rates and the introduction of incentives for those with low rates. Using repeated cross-sectional data from 1989 to 1998, we find that the tax reforms had no effect on the decision to invest in life insurance or the amount invested. The likely explanations are the lack of information and lack of committment to long-term investment.

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File URL: http://www.sciencedirect.com/science/article/B6V76-44HYHDB-3/2/e09297bbcfce3022b38a5ab2156358e4
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Article provided by Elsevier in its journal Journal of Public Economics.

Volume (Year): 87 (2003)
Issue (Month): 7-8 (August)
Pages: 1779-1799

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Handle: RePEc:eee:pubeco:v:87:y:2003:i:7-8:p:1779-1799
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505578

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  1. James Banks & Tanner, S, 2000. "Household portfolios in the UK," IFS Working Papers W00/14, Institute for Fiscal Studies.
  2. Engelhardt, Gary V, 1996. "Tax Subsidies and Household Saving: Evidence from Canada," The Quarterly Journal of Economics, MIT Press, vol. 111(4), pages 1237-68, November.
  3. Jeffrey R. Brown, 1999. "Are the Elderly Really Over-Annuitized? New Evidence on Life Insurance and Bequests," NBER Working Papers 7193, National Bureau of Economic Research, Inc.
  4. Guiso, Luigi & Jappelli, Tullio, 2000. "Household Portfolios in Italy," CEPR Discussion Papers 2549, C.E.P.R. Discussion Papers.
  5. Eric M. Engen & William G. Gale & John Karl Scholz, 1996. "The Illusory Effects of Saving Incentives on Saving," Journal of Economic Perspectives, American Economic Association, vol. 10(4), pages 113-138, Fall.
  6. King, Mervyn A. & Leape, Jonathan I., 1998. "Wealth and portfolio composition: Theory and evidence," Journal of Public Economics, Elsevier, vol. 69(2), pages 155-193, June.
  7. Tullio Jappelli & Marco Pagano, 1994. "Government Incentives and Household Saving in Italy," NBER Chapters, in: Public Policies and Household Savings, pages 105-132 National Bureau of Economic Research, Inc.
  8. Feldstein, Martin S, 1976. "Personal Taxation and Portfolio Composition: An Econometric Analysis," Econometrica, Econometric Society, vol. 44(4), pages 631-50, July.
  9. Hochguertel, Stefan & Alessie, Rob & van Soest, Arthur, 1997. " Saving Accounts versus Stocks and Bonds in Household Portfolio Allocation," Scandinavian Journal of Economics, Wiley Blackwell, vol. 99(1), pages 81-97, March.
  10. James M. Poterba, 2001. "Taxation and Portfolio Structure: Issues and Implications," NBER Working Papers 8223, National Bureau of Economic Research, Inc.
  11. James M. Poterba & Steven F. Venti & David A. Wise, 1996. "How Retirement Saving Programs Increase Saving," Journal of Economic Perspectives, American Economic Association, vol. 10(4), pages 91-112, Fall.
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