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Does Insurance Matter for Growth: Empirical Evidence from OECD Countries

  • Lee Chien-Chiang

    ()

    (National Sun Yat-sen University)

This paper uses disaggregated data on real insurance premiums, including life and non-life insurance premiums, to examine the interrelationship between insurance markets’ activities and economic growth for 10 selected OECD countries during the up-to-date 1979-2006 period. We take recently developed panel unit-root tests, heterogeneous panel cointegration tests, and panel causality techniques and conclude that there is fairly strong evidence favoring the hypothesis of a long-run equilibrium relationship between real GDP and insurance markets’ activities after allowing for the heterogeneous country effect. The results of the long-run panel regression parameter indicate a significantly positive relationship between real GDP and the activities within the insurance market, while a development from the non-life insurance market has a greater impact on real GDP than the activities in the life insurance market do. By implementing the dynamic panel-based error correction model, we determine that insurance markets’ development and economic growth present both the long-run and short-run bidirectional causalities.

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Article provided by De Gruyter in its journal The B.E. Journal of Macroeconomics.

Volume (Year): 11 (2011)
Issue (Month): 1 (June)
Pages: 1-28

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Handle: RePEc:bpj:bejmac:v:11:y:2011:i:1:n:18
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