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Life insurers are exposed to interest rate risk as their liability side is typically more sensitive to interest rate changes than their asset side. This paper explores why insurers assume this risk using a new accounting-based method to measure the interest rate sensitivity of assets and liabilities. Calculation at the insurer level yields a wide duration gap with pronounced heterogeneity in the cross-section.This could be explained by alternative investment strategies, such as asset insulation, which are at odds with interest rate risk management. Using a 2014-2018 panel, factors associated with interest rate risk support this view.

Research Question Life insurers guarantee their customers fixed interest rates for a long period. However, the duration of their assets typically does not match the duration of their policies which exposes the life insurers to the risk of falling interest rates. Quantitatively, little is known about interest rate risk because these companies do not report it in their financial statements. In recent years, however, interest rate risk taken on in the past has partly materialized. Against this background, this paper examines the interest rate risk of life insurers. Contribution An important indicator for measuring interest rate risk of insurers is the duration gap, which is the difference in interest rate sensitivity between assets and liabilities. The wider the gap, the greater the risks when interest rates fall, because the value of liabilities grows more strongly than the value of assets. I show how to estimate the duration gap with data from external accounting. The calculation is based on differences between the book and market values. The indicator is calculated for German life insurers. This offers an insight into the distribution and determinants of interest rate risk. This is important for assessing the contribution of the insurance sector to risks to financial stability. Results The calculation at the insurer level yields on average a wide duration gap for German life insurers with pronounced heterogeneity in the cross-section. This indicates that insurers are exposed to quite different degrees of interest rate risk. A wide dispersion implies differences in terms of the management of interest rate risk. Therefore, insurers are likely to respond differently in their investment decisions to falling interest rates. This reduces the degree of alignment in their behavior and, thereby, potential risks to financial stability. Ergebnisse Die Berechnung auf Einzelinstitutsebene ergibt im Mittel für deutsche Lebensversicherer eine hohe Durationslücke, wobei die Werte im Querschnitt breit gestreut sind. Dies deutet darauf hin, dass deutsche Versicherer in unterschiedlichem Maße Zinsänderungsrisiken ausgesetzt sind. Eine große Bandbreite impliziert Unterschiede im Hinblick auf das Management dieser Risiken. Daher dürften die Versicherer auch bei ihren Kapitalanlageentscheidungen unterschiedlich auf fallende Zinsen reagieren, was die Gefahr gleichgerichteten Verhaltens und damit mögliche Risiken für die Finanzstabilität reduziert.

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. The effect of tax preparation expenses for employees: evidence from Germany * Kay Blaufus, Leibniz Universität Hannover Frank Hechtner, Free University Berlin Axel Möhlmann, Leibniz Universität Hannover January 1, 2014 Terms of use: Documents in AbstractTax preparation firms advertise their services as a way to save taxes. To investigate this subject, we use a panel of German income tax accounting data, consisting of employees and other taxpayers with non-business income, to explore the relationship between expenses for tax preparation and tax liabilities. We find a negative link with expenses exceeding estimated tax savings. Specifically, one additional Euro yields an estimated tax savings of 72 cents in an OLS regression and 24 cents in a fixed-effects regression. This finding indicates that cross-section estimates are upward biased. The magnitude of the effect implies that tax preparation expenses are not worthwhile from a tax saving perspective alone. In consideration of time savings, combined tax and time savings also do not exceed expenses for any income quintile. The result is robust to various alternative specifications such that in no setting do the pecuniary and time savings exceed the tax preparation expenses. Overall, our findings suggest an important benefit of tax preparation expenses beyond tax and time savings.

This paper studies differences in tax morale attitudes between East and West Germany using multiple recent data sets. Contrary to previous 1990s evidence, but in line with recent studies on an east-west mentality gap, we find a persistent higher tax morale in East Germany and no indication of convergence over time. Distinguishing between region of living and birth and periods of within-country migration reveals that the East Germans who stayed determine the results and that migration vanishes differences. Regional economic heterogeneity of tax revenue transfers cannot explain the results. We find a framing effect on the tax morale gap with questions phrasing tax paying as the duty of a good citizen. This result suggests no gap of tax morale with moral reasoning related to the social order and citizenry.Keywords -tax morale, German reunification, east-west differences, convergence, moral reasoning JEL classification: H26, H73 Persistence or Convergence? The East-West Tax Morale Gap in GermanyAbstract This paper studies differences in tax morale attitudes between East and West Germany using multiple recent data sets. Contrary to previous 1990s evidence, but in line with recent studies on an east-west mentality gap, we find a persistent higher tax morale in East Germany and no indication of convergence over time. Distinguishing between region of living and birth and periods of within-country migration reveals that the East Germans who stayed determine the results and that migration vanishes differences. Regional economic heterogeneity of tax revenue transfers cannot explain the results. We find a framing effect on the tax morale gap with questions phrasing tax paying as the duty of a good citizen. This result suggests no gap of tax morale with moral reasoning related to the social order and citizenry.

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Research QuestionLife insurers guarantee their customers fixed interest rates for a long period. However, the duration of their assets typically does not match the duration of their policies which exposes the life insurers to the risk of falling interest rates. Quantitatively, little is known about interest rate risk because these companies do not report it in their financial statements. In recent years, however, interest rate risk taken on in the past has partly materialized. Against this background, this paper examines the interest rate risk of life insurers. ContributionAn important indicator for measuring interest rate risk of insurers is the duration gap, which is the difference in interest rate sensitivity between assets and liabilities. The wider the gap, the greater the risks when interest rates fall, because the value of liabilities grows more strongly than the value of assets. I show how to estimate the duration gap with data from external accounting. The calculation is based on differences between the book and market values. The indicator is calculated for German life insurers. This offers an insight into the distribution and determinants of interest rate risk. This is important for assessing the contribution of the insurance sector to risks to financial stability. ResultsThe calculation at the insurer level yields on average a wide duration gap for German life insurers with pronounced heterogeneity in the cross-section. This indicates that insurers are exposed to quite different degrees of interest rate risk. A wide dispersion implies differences in terms of the management of interest rate risk. Therefore, insurers are likely to respond differently in their investment decisions to falling interest rates. This reduces the degree of alignment in their behavior and, thereby, potential risks to financial stability. Nichttechnische Zusammenfassung FragestellungIhren Kunden garantieren Lebensversicherer für eine lange Laufzeit eine Mindestverzinsung. Hierbei ist jedoch die Laufzeit ihrer Kapitalanlagen typischerweise geringer als die Laufzeit der Versicherungsverträge. Dies setzt Lebensversicherer einem Risiko gegenüber fallenden Zinsen aus. Es ist quantitativ wenig über dieses Zinsänderungsrisiko bekannt, denn diese Unternehmen müssen hierzu in ihren Geschäftsberichten nichts veröffentlichen. In den letzten Jahren hat sich das in der Vergangenheit eingegangene Zinsänderungsrisiko teilweise materialisiert. Vor diesem Hintergrund wird die Höhe des Zinsänderungsrisikos von Lebensversicherern untersucht. Beitrag Eine wichtige Kennzahl zur Messung des Zinsänderungsrisikos von Versicherern ist die Durationslücke, der Unterschied in der Zinssensitivität zwischen Vermögensgegenständen und Verbindlichkeiten. Je höher die Durationslücke, desto größer sind die Risiken aus fallenden Zinsen. Denn in diesem Fall steigt der Barwert der Verbindlichkeiten stärker an als der Barwert der Vermögensgegenstände. Es wird gezeigt, wie man mit Daten aus dem externen Rechnungswesen die Durationslücke abschätzen kann, wobei die Bere...

Using a panel of German income tax accounting data from taxpayers with no business income (employees), we find a negative relationship between tax preparation expenses and tax liabilities. However, preparation expenses are shown to exceed estimated tax savings. Specifically, one additional Euro spent on preparation yields an estimated tax savings of 72 cents in an OLS regression and 24 cents in a fixed effects regression. In addition, we observe substantial heterogeneity in tax savings among income groups, but even if we account for long-term tax savings, tax liability reductions exceed tax preparation expenses only for the highest income quintile. In all other income quintiles, average preparation expenses exceed the estimated tax and time savings. Based on these results, we also examine whether other specific benefits affect an individual's decision to purchase tax preparation services, and the results indicate the importance of the benefits of coping with complexity and reduced uncertainty. Overall, our findings illustrate that the current tax compliance process violates at least two of Adam Smith's principles of taxation, taxes are neither certain nor fair.L'incidence des frais de pr eparation des d eclarations fiscales sur les salari es : donn ees allemandes R ESUM E A partir d'un ensemble de donn ees allemandes relatives a la comptabilisation de l'impôt sur le revenu de contribuables salari es (ne recevant pas de revenu d'entreprise), les auteurs notent l'existence d'une relation n egative entre les frais de pr eparation des d eclarations fiscales et les obligations fiscales. Ils constatent toutefois que les frais de pr eparation exc edent les economies fiscales estim ees. Plus pr ecis ement, un euro suppl ementaire d evolu a la pr eparation des d eclarations fiscales produit une economie fiscale estimative de 72 cents, selon une r egression des MCO, et de 24 cents, selon une r egression a effets fixes. De plus, les auteurs observent une h et erog en eit e importante des economies fiscales entre les tranches de revenu, mais même lorsqu'ils tiennent compte des economies fiscales a long terme, les r eductions des impôts a payer exc edent les frais de pr eparation des d eclarations seulement pour le quintile de revenu sup erieur. Dans tous les autres quintiles de revenu, les frais de pr eparation moyens exc edent les economies estimatives d'impôt et de temps.