Tax Deductions for Losses and Equilibrium in Competitive Insurance Markets
This paper examines how tax deductions related to uninsured personal losses may be Pareto-improving if there are inefficiencies in insurance markets in the context of adverse selection by including individuals with different risk types. In the absence of moral hazard, we provide a positive view of loss deduction policies by showing that they more easily reach a separating equilibrium than does the free market in the Rothschild and Stiglitz equilibrium concept. Copyright International Atlantic Economic Society 2010
Volume (Year): 38 (2010)
Issue (Month): 1 (March)
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