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Culture Matters: Long-Term Orientation and the Demand for Life Insurance

Author

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  • Park Sojung

    (California State University, Fullerton)

  • Lemaire Jean

    (Wharton School)

Abstract

A large body of literature addresses the determination of the economic, financial and institutional factors that significantly influence variations of life insurance demand across countries. Chui and Kwok (2008) included four cultural variables developed by IBM psychologist Hofstede and demonstrated that culture has a profound impact on life insurance consumption. We extend Chui and Kwok's work by analyzing the fifth Hofstede cultural dimension: Long-Term Orientation, a variable that scores countries based on adherence to Confucian principles such as perseverance and thrift, respect of tradition and family values, and honoring of parents and ancestors. After building a database that includes values of 17 variables for 27 countries over a period of 9 years, we apply an unbalanced panel GLS regression model to prove that Long-Term Orientation has a strong positive influence on life insurance demand. Additionally, two new variables, not used in previous life insurance literature, are also found to impact life insurance demand: a modified Herfindahl index and the use of a Common Law legal system. Several robustness tests confirm the importance of Long-Term Orientation, leading to the conclusion that life insurance consumption is bound to increase rapidly in Asia, as its GDP per capita increases.

Suggested Citation

  • Park Sojung & Lemaire Jean, 2011. "Culture Matters: Long-Term Orientation and the Demand for Life Insurance," Asia-Pacific Journal of Risk and Insurance, De Gruyter, vol. 5(2), pages 1-23, July.
    • Handle: RePEc:bpj:apjrin:v:5:y:2011:i:2:n:1
    DOI: 10.2202/2153-3792.1105
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    References listed on IDEAS

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    1. Donghui Li & Fariborz Moshirian & Pascal Nguyen & Timothy Wee, 2007. "The Demand for Life Insurance in OECD Countries," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 74(3), pages 637-652, September.
    2. Mansour Javidan & Robert J House & Peter W Dorfman & Paul J Hanges & Mary Sully de Luque, 2006. "Conceptualizing and measuring cultures and their consequences: a comparative review of GLOBE's and Hofstede's approaches," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 37(6), pages 897-914, November.
    3. Chui, Andy C.W. & Kwok, Chuck C.Y., 2009. "Cultural practices and life insurance consumption: An international analysis using GLOBE scores," Journal of Multinational Financial Management, Elsevier, vol. 19(4), pages 273-290, October.
    4. Sojung C Park & Jean Lemaire & Choong Tze Chua, 2010. "Is the Design of Bonus-Malus Systems Influenced by Insurance Maturity or National Culture? — Evidence from Asia," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 35(S1), pages 7-27, December.
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    3. Trinh, Cong Tam & Chao, Chi-Chur & Ho, Nhut Quang, 2023. "Private health insurance consumption and public health-care provision in OECD countries: Impact of culture, finance, and the pandemic," The North American Journal of Economics and Finance, Elsevier, vol. 64(C).
    4. DiRienzo Cassandra E. & Das Jayoti, 2020. "Illicit Trade and Hofstede’s Cultural Dimensions," Economics and Culture, Sciendo, vol. 17(2), pages 63-74, December.
    5. Cong Tam Trinh & Minh-Tri Ha & Nhut Quang Ho & Tho Alang, 2023. "National culture, public health spending and life insurance consumption: an international comparison," Palgrave Communications, Palgrave Macmillan, vol. 10(1), pages 1-14, December.
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    7. Malakauskienė Karolina & Lakštutienė Aušrinė & Witkowska Justyna, 2022. "Factors Influencing Non-Life Insurance Demand: Case of Lithuania," Management Theory and Studies for Rural Business and Infrastructure Development, Sciendo, vol. 44(3), pages 244-253, September.
    8. Bojan Srbinoski & Klime Poposki & Patricia H. Born & Valter Lazzari, 2021. "Life insurance demand and borrowing constraints," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 24(1), pages 37-69, March.
    9. Dragos, Simona Laura & Dragos, Cristian Mihai & Muresan, Gabriela Mihaela, 2020. "From intention to decision in purchasing life insurance and private pensions: different effects of knowledge and behavioural factors," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 87(C).
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