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Economic growth and insurance development: The role of institutional environments

Listed author(s):
  • Lee, Chien-Chiang
  • Chang, Chi-Hung
  • Arouri, Mohamed
  • Lee, Chi-Chuan

This paper investigates how institutional environments shape the relation between insurance and economic growth by applying an innovative dynamic panel threshold model. Using multiple general measures related to political, economic, and legal environments to assess the soundness of institutional environments, we find that the relation between life insurance and economic growth is negative in the regime with relatively unhealthier institutional environments. However, this significantly negative effect becomes insignificant after a certain level or threshold of institutional quality has been achieved. A generally unhealthy institutional circumstance could deter the growth effect of life insurance sectors. This result might be explained by the problem of moral hazard and adverse selection, the behavior of risk-taking, as well as macroeconomic volatility.

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File URL: http://www.sciencedirect.com/science/article/pii/S0264999316302358
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Article provided by Elsevier in its journal Economic Modelling.

Volume (Year): 59 (2016)
Issue (Month): C ()
Pages: 361-369

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Handle: RePEc:eee:ecmode:v:59:y:2016:i:c:p:361-369
DOI: 10.1016/j.econmod.2016.08.010
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/30411

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