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An investigation of the insurance sector's contribution to economic growth
The importance of the insurance industry in an economy has been well recognized. Yet there is no extensive study on this area. In this dissertation, the economic role of the Insurance sector has been studied through (1) setting up theoretical models to illustrate how insurance growth may contribute to economic growth and (2) conducting a series of empirical studies to find whether there is empirical evidence to support the models developed. Although the insurance sector plays several important roles in economic growth, I only focus on two roles here in the dissertation. First, property and liability insurance serve as risk sharing institutions in an economy. Second, life insurance sector can provide more long run capital into an economy.^ I develop two theoretical models to illustrate the above two roles separately. In the property and liability insurance model, an economy, which is composed of risk-averse agents, without an insurance sector is set up first. It shows that individual utility maximization can not achieve social optimization. After an insurance sector is introduced into the economy, social optimization can be achieved through individual utility maximization. In the life insurance model, contractual savings institutions, which include life insurance companies, can shift short term savings to long term savings. At the end of this part, a discussion is presented to link insurance sector with the technological progress.^ Four countries data have been studied to see whether there is empirical evidence for the above models developed. Three empirical methods are employed and compared: OLS, simultaneous equations and fixed effect model. All four countries data show evidence that property and liability insurance promote economic growth. However, two countries data show that life insurance promote economic growth while the other two countries data have just the opposite conclusion. Some possible reasons for this evidence are presented.^
Tong, Haizhi, "An investigation of the insurance sector's contribution to economic growth" (2008). ETD collection for University of Nebraska - Lincoln. AAI3315878.