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Production Efficiency in the Austrian Insurance Industry: A Bayesian Examination

Author

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  • Karl C. Ennsfellner
  • Danielle Lewis
  • Randy I. Anderson

Abstract

This paper examines the developments in the production efficiency of the Austrian insurance market for the period 1994-1999 using firm-specific data on life/health and non-life insurers obtained from the Austrian insurance regulatory authority. The article uses a Bayesian stochastic frontier to obtain aggregate and firm-specific estimates of production efficiency across insurer types and time. The study provides strong evidence that the process of deregulation had positive effects on the production efficiency of Austrian insurers. The life/health and non-life firms showed similar patterns of development in that they were less efficient during the years 1994-1996 and significantly more efficient in 1997-1999. If the Austrian experience is representative, similar benefits from deregulation may be expected for the Central and Eastern European countries that prepare for the accession to the European Union. Copyright The Journal of Risk and Insurance.

Suggested Citation

  • Karl C. Ennsfellner & Danielle Lewis & Randy I. Anderson, 2004. "Production Efficiency in the Austrian Insurance Industry: A Bayesian Examination," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 71(1), pages 135-159.
  • Handle: RePEc:bla:jrinsu:v:71:y:2004:i:1:p:135-159
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    References listed on IDEAS

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    1. Kimball, Miles S, 1990. "Precautionary Saving in the Small and in the Large," Econometrica, Econometric Society, pages 53-73.
    2. Mayers, David & Smith, Clifford W, Jr, 1983. "The Interdependence of Individual Portfolio Decisions and the Demand for Insurance," Journal of Political Economy, University of Chicago Press, vol. 91(2), pages 304-311, April.
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    4. Philippe Mongin, 2003. "L'axiomatisation et les théories économiques," Revue économique, Presses de Sciences-Po, pages 99-138.
    5. Shiller, Robert J & Weiss, Allan N, 1999. "Home Equity Insurance," The Journal of Real Estate Finance and Economics, Springer, pages 21-47.
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    Citations

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    Cited by:

    1. Brito, Duarte & Pereira, Pedro & Ramalho, Joaquim J.S., 2013. "Mergers, coordinated effects and efficiency in the Portuguese non-life insurance industry," International Journal of Industrial Organization, Elsevier, pages 554-568.
    2. Trigo Gamarra, Lucinda, 2008. "The effects of liberalization and deregulation on the performance of financial institutions: The case of the German life insurance market," Thuenen-Series of Applied Economic Theory 93, University of Rostock, Institute of Economics.
    3. Wanke, Peter & Barros, Carlos Pestana, 2016. "Efficiency drivers in Brazilian insurance: A two-stage DEA meta frontier-data mining approach," Economic Modelling, Elsevier, pages 8-22.
    4. Jim Griffin & Mark Steel, 2005. "Bayesian Stochastic Frontier Analysis Using WinBUGS," Econometrics 0509004, EconWPA.
    5. Jim Griffin & Mark Steel, 2007. "Bayesian stochastic frontier analysis using WinBUGS," Journal of Productivity Analysis, Springer, pages 163-176.
    6. Byeongyong Paul Choi & Elyas Elyasiani, 2011. "Foreign-owned insurer performance in the US property-liability markets," Applied Economics, Taylor & Francis Journals, vol. 43(3), pages 291-306.
    7. Chrysovalantis Gaganis & Iftekhar Hasan & Fotios Pasiouras, 2013. "Efficiency and stock returns: evidence from the insurance industry," Journal of Productivity Analysis, Springer, pages 429-442.
    8. Chen, Fu-Chiang & Liu, Z.-John & Kweh, Qian Long, 2014. "Intellectual capital and productivity of Malaysian general insurers," Economic Modelling, Elsevier, pages 413-420.
    9. repec:pal:gpprii:v:43:y:2018:i:1:d:10.1057_s41288-017-0058-z is not listed on IDEAS
    10. Jorge M. Andraz & Nelia M. Norte, 2013. "Output volatility in the OECD: Are the member states becoming less vulnerable to exogenous shocks?," Economic Issues Journal Articles, Economic Issues, vol. 18(2), pages 91-122, September.
    11. Fenn, Paul & Vencappa, Dev & Diacon, Stephen & Klumpes, Paul & O'Brien, Chris, 2008. "Market structure and the efficiency of European insurance companies: A stochastic frontier analysis," Journal of Banking & Finance, Elsevier, vol. 32(1), pages 86-100, January.
    12. J. Cummins & Georges Dionne & Robert Gagné & A. Nouira, 2009. "Efficiency of insurance firms with endogenous risk management and financial intermediation activities," Journal of Productivity Analysis, Springer, pages 145-159.
    13. Biener, Christian & Eling, Martin & Wirfs, Jan Hendrik, 2016. "The determinants of efficiency and productivity in the Swiss insurance industry," European Journal of Operational Research, Elsevier, pages 703-714.
    14. Chrysovalantis Gaganis & Iftekhar Hasan & Fotios Pasiouras, 2013. "Efficiency and stock returns: evidence from the insurance industry," Journal of Productivity Analysis, Springer, pages 429-442.
    15. Biener, Christian & Eling, Martin & Wirfs, Jan Hendrik, 2016. "The determinants of efficiency and productivity in the Swiss insurance industry," European Journal of Operational Research, Elsevier, pages 703-714.
    16. Khan, Atiquzzafar & Noreen, Uzma, 2014. "Efficiency Measure of Insurance v/s Tak ful Firms Using DEA Approach: A Case of Pakistan," Islamic Economic Studies, The Islamic Research and Training Institute (IRTI), pages 139-158.
    17. Saowaros Yaisawarng & Preecha Asavadachanukorn & Suthathip Yaisawarng, 2014. "Efficiency and productivity in the Thai non-life insurance industry," Journal of Productivity Analysis, Springer, pages 291-306.
    18. Jarraya, Bilel & Bouri, Abdelfettah, 2012. "Efficiency concept and investigations in insurance industry: A survey," MPRA Paper 53544, University Library of Munich, Germany, revised 2013.
    19. Gaganis, Chrysovalantis & Liu, Liuling & Pasiouras, Fotios, 2015. "Regulations, profitability, and risk-adjusted returns of European insurers: An empirical investigation," Journal of Financial Stability, Elsevier, pages 55-77.
    20. Maria Rosa Borges & Milton Nektarios & Carlos Pestana Barros, 2008. "Analysing The Efficiency Of The Greek Life Insurance Industry," European Research Studies Journal, European Research Studies Journal, pages 35-52.
    21. Biener, Christian & Eling, Martin, 2012. "Organization and efficiency in the international insurance industry: A cross-frontier analysis," European Journal of Operational Research, Elsevier, pages 454-468.
    22. Eling, Martin & Luhnen, Michael, 2010. "Efficiency in the international insurance industry: A cross-country comparison," Journal of Banking & Finance, Elsevier, vol. 34(7), pages 1497-1509, July.

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