Does Insurance Market Activity Promote Economic Growth? A Cross-Country Study for Industrialized and Developing Countries

26 Pages Posted: 7 Nov 2008

Abstract

Insurance market activity may contribute to economic growth, both as financial intermediary and provider of risk transfer and indemnification, by allowing different risks to be managed more efficiently and by mobilizing domestic savings. During the last decade, there has been faster growth in insurance market activity, particularly in emerging markets, given the process of financial liberalization and integration, which raises questions about the overall impact on economic growth. This article tests whether there is a causal relationship between insurance market activity (life and nonlife insurance) and economic growth. Using the generalized method of moments (GMM) for dynamic models of panel data for 55 countries between 1976 and 2004, I find robust evidence for this relationship. Both life and nonlife insurance have a positive and significant causal effect on economic growth. For life insurance, high-income countries drive the results, and for nonlife insurance, both high-income and developing countries drive the results.

Suggested Citation

Arena, Marco, Does Insurance Market Activity Promote Economic Growth? A Cross-Country Study for Industrialized and Developing Countries. Journal of Risk & Insurance, Vol. 75, Issue 4, pp. 921-946, December 2008. Available at SSRN: https://ssrn.com/abstract=1296891 or http://dx.doi.org/10.1111/j.1539-6975.2008.00291.x

Marco Arena (Contact Author)

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

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