nep-ias New Economics Papers
on Insurance Economics
Issue of 2007‒08‒18
four papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Bussiness Management

  1. Savings motives and the effectiveness of tax incentives – an analysis based on the demand for life insurance in Germany By Mathias Sommer
  2. The Unification of the Social Insurance Contribution Collection System in Korea By Sinchul Jang
  3. Remittances as insurance for idiosyncratic and covariate shocks in Malawi: The importance of distance and relationship By Davies, Simon
  4. Migration, Risk and the Intra-Household Allocation of Labor in El Salvador By Timothy J. Halliday

  1. By: Mathias Sommer (Mannheim Research Institute for the Economics of Aging (MEA))
    Abstract: We exploit data on German households’ savings in life insurance products, the characteristics of life insurance products and the specific tax treatment of savings in life insurance products to assess the importance of different savings motives and the effectiveness of tax incentives. Our insights about the determinants of the demand for life insurance products also allow a broad assessment of the possible consequences from the recent reforms of the pension system and of the tax treatment of life insurance policies. Socioeconomic and institutional factors generate substantial variation within the population and over time, e.g. in the replacement rates of the public pension system and the household tax rates, which allows us to disentangle savings motives and the effects of tax incentives from other factors. We employ a number of indicators for the different savings motives. Further, based on the specifics of the German tax law and the richness of our data we are able to generate a unique measure of possible tax savings associated with savings in life insurance products. We find support for our hypothesis that savings in life insurance products may substitute for a low replacement rate in the public pension system. Only high income households who face lower replacement rates from the public pension system do not increase their demand for life insurance products. Further, we use several measures for a possible bequest or family insurance motive. Our evidence on the relevance of such savings motives is mixed like the existing literature. The presence of a family increases the demand for term life insurance but households with children do not accumulate higher levels of life insurance wealth. Further, some income inequality within a couple increases the likelihood to save in life insurance. The effects are not increasing in the degree of income inequality though and only partly significant. Finally, we find households with high tax rates to be more likely to invest in life insurance products, indicating that the tax free interest earnings from a long term insurance contract play a strong role in households’ choice to invest in life insurance. The possibility to deduct contributions from taxable income turns out to be no incentive to save in life insurance products.
    JEL: D14 G11 G22
    Date: 2007–08–02
  2. By: Sinchul Jang
    Abstract: Korea introduced industrial accident insurance (IACIS) in 1964, medical insurance (MIS) in 1977, pension insurance (NPS) in 1988 and employment insurance (EIS) in 1995. In line with Korea’s economic development, social insurance coverage has grown rapidly, and contribution coverage rates now generally exceed 80% for regular workers. However, the four social insurance systems developed separately. The main split in contribution collection methods has been between the insurances under the Ministry of Labour (EIS and IACIS) and those under the Ministry of Health and Welfare (MIS and NPS), although there are also some differences between MIS and NPS. About 50% of the staff in each system has been engaged in collection activities... <BR>La Corée a créé l?assurance pour les accidents du travail (IACIS) en 1964, l?assurance médicale (MIS) en 1977, l?assurance retraite (NPS) en 1988 et l?assurance emploi (EIS) en 1995. En tandem avec le développement économique du pays, la couverture de la protection sociale a rapidement augmenté et les taux de cotisation dépassent désormais 80% pour les travailleurs "réguliers" (fixes). Pourtant les quatre systèmes d?assurance sociale se sont développés séparément. La principale scission en ce qui concerne les méthodes de collecte des cotisations a été entre les assurances sous le Ministère du Travail (EIS et IACIS) et celles sous le Ministère de la Santé et du Bien-être (MIS et NPS), bien qu?il existe également certaines différences entre le MIS et le NPS. Environ 50% du personnel dans chaque système est engagé dans les activités de collecte...
    Keywords: Korea, Corée
    JEL: H26 H53 J41 J81
    Date: 2007–08–06
  3. By: Davies, Simon
    Abstract: This paper uses Malawian panel data to show the importance of geography and family relationships when studying remittances. We do not test any hypothesis as such, but instead demonstrate the significance of the source of remittances in testing hypotheses. When remittances are viewed from an insurance perspective, geography matters. Covariate (community) shocks tend to be insured further from home than idiosyncratic ones. When viewed from a motivational perspective, family relationship and culture matter. Furthermore, gift exchange amongst unrelated households can be as important as remittance flows amongst members of the same family in insuring shocks. Inter-household remittances are closely linked to social networks, with business and religious groups being particularly important (perhaps due to trust). Remittance flows are often reciprocal – receiving households often being the main senders, emphasizing their insurance nature.
    Keywords: Remittances; Insurance; Household Economics; Malawi; Africa
    JEL: O18 D19 D31
    Date: 2007–07
  4. By: Timothy J. Halliday (Department of Economics and John A. Burns School of Medicine, University of Hawaii at Manoa)
    Abstract: We use panel data from El Salvador to investigate the intra-household allocation of labor as a risk-coping strategy. We show that adverse agricultural productivity shocks primarily increased male migration to the US with much smaller effects on female migration. This is consistent with the observation that the bulk of households allocated no women to the agricultural sector. These shocks also increased the number of hours that the household devoted to agricultural activities. These results do not contradict each other if one considers the possibility that the shocks had non-monotonic effects on shadow wages during the survey period. In contrast, damage sustained from the 2001 earthquakes exclusively stunted female migration. We argue that the reasons for this were that the earthquakes increased the demand for home production and that most men in our data are not engaged in domestic production at all.
    Keywords: Migration, Labor Supply, Insurance, Intra-Household Allocation
    Date: 2007–08–08

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