TY  - JOUR
AU  - Ke,Bin
AU  - Petroni,Kathy
AU  - Shackelford,Douglas A.
TI  - The Impact of State Taxes on Self-Insurance
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 7453
PY  - 1999
Y2  - December 1999
UR  - http://www.nber.org/papers/w7453
L1  - http://www.nber.org/papers/w7453.pdf
N1  - Author contact info:
Bin Ke
Nanyang Business School
S3-01B-39, 50 Nanyang Avenue
Singapore 639798
E-Mail: kebin@ntu.edu.sg

Kathy Petroni
Michigan State University
E-Mail: petroni@msu.edu

Douglas Shackelford
University of North Carolina at Chapel Hill
Kenan-Flagler Business School
Campus Box 3490, McColl Building
Chapel Hill, NC  27599-3490
Tel: 919/962-3197
Fax: 919/962-4727
E-Mail: doug_shack@unc.edu
AB  - This paper assesses whether insurers' state taxes reduce purchases of property-casualty coverage.  Tests are conducted using state aggregates of insurer-level data from publicly-available, annual accounting reports for 1993, 1994, and 1995.  A positive relation between self-insurance and state taxes is detected, consistent with consumers opting to self-insure rather than bear the incidence of higher insurer taxes.  The primary empirical estimates imply that a 1 percent increase in the state premium tax rate reduces non-automobile insured losses by 0.18 percent to 0.28 percent.  These elasticities suggest that for the mean state, a standard deviation increase in the state tax rate (0.5 percent) would lower insured losses by approximately $140 million or 7.5 percent of current coverage.  As expected, tax effects vary with the elasticity of demand.  When demand is largely inelastic, e.g., automobile liability coverage, taxes do not affect self-insurance.
ER  -