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Insurance market development and economic growth

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  • Abdul Latif Alhassan

Abstract

Purpose - – The purpose of this paper is to examine the causal relationship between insurance penetration and economic growth in eight selected African countries. Design/methodology/approach - – The auto-regressive distributed lags bounds approach to cointegration is employed on annual time-series data from 1990 to 2010 to test the causal relationship between insurance and economic growth in Algeria, Gabon, Kenya, Madagascar, Mauritius, Morocco, Nigeria and South Africa. The ratio of life and non-life insurance premiums to gross domestic product are employed as proxies for insurance market development. Findings - – The results of the bound test shows a long-run relationship between insurance market activities and economic growth for Kenya, Mauritius, Morocco, Nigeria and South Africa. Causality analysis within the vector error correction model indicates a uni-directional causality from insurance market development to economic growth except for Morocco where there is evidence of a bi-directional causality. Causality within the vector autoregressive framework also provides evidence of a uni-directional causality for Algeria and Madagascar to support the “supply-leading” hypothesis while mixed causality was found for Gabon. Practical implications - – This findings provides policy direction for governments and regulatory authorities for developing insurance market in the sample countries. Originality/value - – This is the first study to examine the finance-growth relationship from the perspective of insurance markets in a cross-section of African countries.

Suggested Citation

  • Abdul Latif Alhassan, 2016. "Insurance market development and economic growth," International Journal of Social Economics, Emerald Group Publishing Limited, vol. 43(3), pages 321-339, March.
    • Handle: RePEc:eme:ijsepp:v:43:y:2016:i:3:p:321-339
    DOI: 10.1108/IJSE-09-2014-0182
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    Citations

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    Cited by:

    1. Simplice A. Asongu & Nicholas M. Odhiambo, 2020. "Insurance Policy Thresholds for Economic Growth in Africa," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 32(3), pages 672-689, July.
    2. Simplice A. Asongu & Nicholas M. Odhiambo, 2021. "Information Asymmetry and Insurance in Africa," Journal of African Business, Taylor & Francis Journals, vol. 22(3), pages 394-410, July.
    3. Simplice Asongu & Nicholas M. Odhiambo, 2020. "Financial access, governance and insurance sector development in sub-Saharan Africa," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 47(4), pages 849-875, February.
    4. Simplice A. Asongu & Nicholas M. Odhiambo, 2019. "Enhancing ICT for insurance in Africa," Review of Development Finance Journal, Chartered Institute of Development Finance, vol. 9(2), pages 16-27.
    5. Alhassan, Abdul Latif & Biekpe, Nicholas, 2016. "Determinants of life insurance consumption in Africa," Research in International Business and Finance, Elsevier, vol. 37(C), pages 17-27.
    6. Jacob Azaare & Zhao Wu & Bright Nana Kwame Ahia, 2022. "Exploring the Effects of Classical Auto Insurance Rating Variables on Premium in ARDL: Is the high Policyholders’ Premium in Ghana Justified?," SAGE Open, , vol. 12(4), pages 21582440221, October.
    7. Sajid Mohy Ul Din & Arpah Abu-Bakar & Angappan Regupathi, 2017. "Does insurance promote economic growth: A comparative study of developed and emerging/developing economies," Cogent Economics & Finance, Taylor & Francis Journals, vol. 5(1), pages 1390029-139, January.
    8. Simplice Asongu & Joseph Nnanna & Paul Acha-Anyi, 2019. "Information technology, governance and insurance in Sub-Saharan Africa," Social Responsibility Journal, Emerald Group Publishing Limited, vol. 16(8), pages 1253-1273, September.
    9. Gentiana Sharku, Evis Kumi, 2021. "Does insurance market impact the economic growth? Evidence from Albania," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 18(2), pages 267-289, December.
    10. Simplice A. Asongu, 2020. "Technology, Education, Life and Non-life Insurance in Africa," International Journal of Public Administration, Taylor & Francis Journals, vol. 43(11), pages 915-925, August.
    11. Simplice A. Asongu & Nicholas M. Odhiambo, 2020. "Insurance and Inequality in Sub-Saharan Africa: Policy Thresholds," Working Papers of the African Governance and Development Institute. 20/005, African Governance and Development Institute..
    12. Balcilar, Mehmet & Gupta, Rangan & Lee, Chien-Chiang & Olasehinde-Williams, Godwin, 2018. "The synergistic effect of insurance and banking sector activities on economic growth in Africa," Economic Systems, Elsevier, vol. 42(4), pages 637-648.
    13. Cong Tam Trinh & Xuan Nguyen & Pasquale Sgro, 2021. "Culture and the demand for non‐life insurance: Empirical evidences from middle‐income and high‐income economies," Economics of Transition and Institutional Change, John Wiley & Sons, vol. 29(3), pages 431-458, July.
    14. Mirela Mitrasević & Miloš Pjanić & Milijana Novovic Burić, 2022. "Relationship Between Insurance Market and Economic Growth in the European Union," Politická ekonomie, Prague University of Economics and Business, vol. 2022(4), pages 395-420.
    15. Trinh, Cong Tam & Nguyen, Xuan & Sgro, Pasquale & Pham, Cong S., 2020. "Culture, financial crisis and the demand for property, accident and health insurance in the OECD countries," Economic Modelling, Elsevier, vol. 93(C), pages 480-498.
    16. Gentiana SHARKU & Etleva BAJRAMI, 2021. "Insurance-Economic Growth Nexus - Evidence From Selected Western Balkan'S Countries," Regional Science Inquiry, Hellenic Association of Regional Scientists, vol. 0(2), pages 53-68, June.
    17. Mehmet Balcilar & Rangan Gupta & Chien-Chiang Lee & Godwin Olasehinde-Williams, 2020. "Insurance-growth nexus in Africa," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 45(2), pages 335-360, April.

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