Economic growth and insurance development: The role of institutional environments

Lee, Chien‐Chiang; Chang, Chi-Hung; Arouri, Mohamed El Hédi; Lee, Chi‐Chuan

doi:10.1016/j.econmod.2016.08.010

Cited by 64 publications

(47 citation statements)

References 46 publications

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“…They prove that the governance environment influences the effect of financial reforms upon the life insurance industry. Lee, Chang, Arouri and Lee (2016) found that institutions play a passive role in the development of the insurance market. According to them a sound institutional environment does not help the growth effect, but unhealthy institutions are harmful for insurance development.…”

Section: Related Literaturementioning

confidence: 99%

The nexus between the demand for life insurance and institutional factors in Europe: new evidence from a panel data approach

Dragoş

Mare

Dragotă

et al. 2017

Economic Research-Ekonomska Istraživanja

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We investigate the influence of institutional factors upon life insurance demand for 32 European countries, considering the sociodemographic and economic determinants as control variables. Using a panel data approach, we find that life insurance demand is influenced differently by institutional indicators from the Worldwide Governance Indicators database, in emerging and transition markets compared to developed ones. The sound legal environment of developed countries, where the level of the rule of law is very homogeneous and very high, makes it non-significant for life insurance demand. For developing countries the enforceability of contracts, the independence of justice and the time efficiency of the judicial process positively influence the decision of citizens to buy life insurance contracts. The effect of income distribution over life insurance density varies across these two categories of countries. For transition and emerging markets we find a positive relationship between life insurance density, income distribution and level of urbanisation. In developed countries, because of the high levels of income, life insurance became a common good, not a luxury one, which makes income distribution an insignificant factor. For emerging and transition countries policymakers should concentrate more on strengthening trust in the insurance sector for reducing the gap with developed countries.

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Section: Related Literaturementioning

confidence: 99%

The nexus between the demand for life insurance and institutional factors in Europe: new evidence from a panel data approach

Dragoş

Mare

Dragotă

et al. 2017

Economic Research-Ekonomska Istraživanja

View full text Add to dashboard Cite

show abstract

“…Life insurance activities are beneficial to economic performance in France and Japan, but are harmful to economic performance in Italy and the United Kingdom. This possibility of the economy being adversely affected may be attributed to the fact of ‘too much finance’ (Law & Singh, ; Lee, Chang, Arouri, & Lee, ; Samargandi et al, ).…”

Section: Resultsmentioning

confidence: 99%

Insurance activity and economic performance: Fresh evidence from asymmetric panel causality tests

Hatemi‐J

Lee

Gupta

2018

International Finance

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Insurance plays a fundamental role in any modern economy, but the literature has not accounted for the potential asymmetric causal impacts from the dynamic interaction between the insurance market and economic performance. This paper aims to fill this gap by studying the causal relationship between several measures of insurance per capita and real GDP per capita in the G7 countries over the period 1980-2014 via asymmetric panel causality tests. Our results show that insurance market activity and economic performance exhibit bidirectional causalities, but their direction, intensity and significance are different due to distinct market situations. In general, insurance activity plays a passive role in economic performance, while economic performance has a significant role in insurance activity. These findings offer several useful insights for policy makers and researchers.

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“…For instance, Olayungbo and Akinlo (2016) found negative effect of insurance on economic growth for Nigeria, Tunisia and Zimbabwe. A possible explanation for this seemingly counter-intuitive result could be the savings-substitution effect (Lee et al, 2016). That is, if insurance premiums are invested abroad this can represent a leakage from the income-expenditure flow which may negatively affect economic growth.…”

Section: Long-run and Short-run Elasticitiesmentioning

confidence: 96%

“…The economy is negatively affected when few customers are attracted to bank securities, and banks are not able to provide liquidity to the market, which reduces investment, which in turn reduces economic growth. Lee et al (2016) argues that the impact that insurance assets have on economic growth depend on where those assets are invested: at home or abroad -the savings-substitution effect. If a larger proportion is invested abroad that would represent a leakage from the income-expenditure flow.…”

Section: Asian Economic and Financial Reviewmentioning

confidence: 99%

Insurance - Economic Growth Nexus: Evidence from Botswana

Oitsile

Galebotswe

Sekwati

2018

Asian Economic and Financial Review

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Article HistoryThe paper investigates the influence of insurance penetration on economic growth in Botswana for the period 1994-2013. Using the autoregressive distributed lag (ARDL) bounds test approach to Cointegration by Pesaran et al. (2001) the study finds a negative long-run relationship between insurance penetration and economic growth. This suggests that the recent rapid expansion of the insurance sector could be hurting the economy's long-run growth. We contend that this finding could reflect a savingsubstitution effect in which insurance assets mobilized locally are invested abroad. However, the effect is economically small and statistically significant only at the 10 percent level. Furthermore, there is no evidence that insurance penetration affects growth in the short-run. Nonetheless we argue that there is a need to pay more attention to the insurance sector in financial sector policy analysis, lest it becomes a significant leakage of funds from the income-expenditure stream. Contribution/ Originality:This study contributes to the existing literature on the insurance-growth relationship. The study uses the autoregressive distributed lag (ARDL) bounds test approach to Cointegration to estimate the impact of insurance penetration on the economic growth of Botswana. It is the first study to gauge the quantitative effect of insurance sector development on Botswana's economic growth.

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Economic growth and insurance development: The role of institutional environments

Cited by 64 publications

References 46 publications

The nexus between the demand for life insurance and institutional factors in Europe: new evidence from a panel data approach

The nexus between the demand for life insurance and institutional factors in Europe: new evidence from a panel data approach

Insurance activity and economic performance: Fresh evidence from asymmetric panel causality tests

Insurance - Economic Growth Nexus: Evidence from Botswana

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