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Sociodemographic, economic, and psychological drivers of the demand for life insurance: Evidence from the German Retirement Income Act

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  • Hecht, Carolin
  • Hanewald, Katja

Abstract

We exploit the natural experiment of the 2005 income tax reform in Germany to study the effects of tax incentives on consumer behavior in life insurance markets. Our empirical analysis of sociodemographic, economic, and psychological household characteristics elicited in the German SAVE study shows that two very different consumer groups buy (endowment) life insurance before and after the tax reform. We find that education plays a central role in reactions to the modified tax environment. Our stylized characterization of 'arbitrageur' and 'straggler' buyers will assist both life insurance firms and regulatory authorities design effective policies.

Suggested Citation

  • Hecht, Carolin & Hanewald, Katja, 2010. "Sociodemographic, economic, and psychological drivers of the demand for life insurance: Evidence from the German Retirement Income Act," SFB 649 Discussion Papers 2010-034, Humboldt University Berlin, Collaborative Research Center 649: Economic Risk.
    • Handle: RePEc:zbw:sfb649:sfb649dp2010-034
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    More about this item

    Keywords

    life insurance demand; tax incentives; financial literacy;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • K34 - Law and Economics - - Other Substantive Areas of Law - - - Tax Law

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