Tax Deductions for Losses and Equilibrium in Competitive Insurance Markets |
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| Authors: | Chu-Shiu Li Chwen-Chi Liu Chen-Sheng Yang |
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| Institution: | (1) Department of Economics, Feng Chia University, Taichung, Taiwan;(2) Department of Risk Management and Insurance, Feng Chia University, Taichung, Taiwan;(3) Department of International Business, Central Taiwan University of Science and Technology, Taichung, Taiwan |
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| Abstract: | 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. |
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