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Revisiting the insurance–growth nexus

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  • Scharner, Philipp
  • Sonnenberger, David
  • Weiß, Gregor

Abstract

This paper revisits the relation between economic growth and life insurance consumption for a panel of 130 countries in the period between 2003 and 2016. To address endogeneity concerns, we instrument economic growth by the quality of governments’ regulations and show that economic growth positively affects different measures of insurance consumption. Additionally, we find that the share of income households spend on life insurance increases as economies become wealthier. Our findings thus support the demand-following and feedback hypotheses, which state that economic growth contributes to insurance sector development. Finally, we provide evidence that these effects are stronger for middle- compared to high-income economies. Consistent with the idea that the marginal propensity to consume is especially large in low-income economies, we cannot find any evidence that economic growth affects insurance consumption in these countries.

Suggested Citation

  • Scharner, Philipp & Sonnenberger, David & Weiß, Gregor, 2023. "Revisiting the insurance–growth nexus," Economic Analysis and Policy, Elsevier, vol. 79(C), pages 525-539.
    • Handle: RePEc:eee:ecanpo:v:79:y:2023:i:c:p:525-539
    DOI: 10.1016/j.eap.2023.06.007
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    References listed on IDEAS

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    More about this item

    Keywords

    Insurance–growth nexus; Life insurance; Feedback hypothesis; Demand-following hypothesis; IV regression;
    All these keywords.

    JEL classification:

    • C36 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Instrumental Variables (IV) Estimation
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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