Tax Incentives and the Demand for Life Insurance: Evidence from Italy

Jappelli, Tullio; Pistaferri, Luigi

Purchase - $8 CEPR Subscribers Download

Add Paper to My Library

Tax Incentives and the Demand for Life Insurance: Evidence from Italy

44 Pages Posted: 10 May 2001

See all articles by Tullio Jappelli

Tullio Jappelli

University of Naples Federico II - Department of Economics and Statistics; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI); Center for Studies in Economics and Finance - CSEF; CSEF - University of Naples Federico II - Centre for Studies in Economics and Finance (CSEF)

Luigi Pistaferri

Centre for Economic Policy Research (CEPR); Stanford University

Date Written: May 2001

Abstract

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 commitment to long-term investment.

Keywords: Portfolio choice, saving, tax incentives

JEL Classification: D91, H20

Suggested Citation: Suggested Citation

Jappelli, Tullio and Pistaferri, Luigi and Pistaferri, Luigi, Tax Incentives and the Demand for Life Insurance: Evidence from Italy (May 2001). Available at SSRN: https://ssrn.com/abstract=269375