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Suicide and Life Insurance

Author

Listed:
  • 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.

Suggested Citation

  • Joe Chen & Yun Jeong Choi & Yasuyuki Sawada, 2008. "Suicide and Life Insurance," CIRJE F-Series CIRJE-F-558, CIRJE, Faculty of Economics, University of Tokyo.
    • Handle: RePEc:tky:fseres:2008cf558
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    File URL: http://www.cirje.e.u-tokyo.ac.jp/research/dp/2008/2008cf558.pdf
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    References listed on IDEAS

    as
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    5. 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.
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    7. 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..
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    9. Pierre-Andre Chiappori & Bernard Salanie, 2000. "Testing for Asymmetric Information in Insurance Markets," Journal of Political Economy, University of Chicago Press, vol. 108(1), pages 56-78, February.
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    Cited by:

    1. Yamamoto, Shinichi & 山本, 信一 & Yoneyama, Takau & 米山, 高生 & Kwon, W. Jean, 2012. "An Experimental Study On Adverse Selection And Moral Hazard," Hitotsubashi Journal of commerce and management, Hitotsubashi University, vol. 46(1), pages 51-64, October.
    2. Daisy Daiqin He & Jian Yang & Michael Compton & Kerry Taylor, 2012. "Authorization in cross-border eHealth systems," Information Systems Frontiers, Springer, vol. 14(1), pages 43-55, March.
    3. 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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