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Insurance and Optimal Growth

Author

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  • Frédéric Gannon

    (EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique, CERENE - Centre d'Etude et de Recherche en économiE et gestioN LogistiquE - ULH - Université Le Havre Normandie - NU - Normandie Université)

  • Vincent Touzé

    (OFCE - Observatoire français des conjonctures économiques (Sciences Po) - Sciences Po - Sciences Po)

Abstract

The aim of this paper is to propose a theoretical connection between insurance and economic growth. We develop a simple model to insert microeconomically founded optimal insurance with moral hazard in a standard macroeconomic framework of optimal growth. We characterize the long-run equilibrium, the global dynamics and the evolution of insurance coverage with time. Three types of trajectories are identified: first, a simple dynamics with permanent partial insurance or full insurance, second, one with regime switching converging to a steady state with full or partial insurance and, finally, one with mixed equilibrium.

Suggested Citation

  • Frédéric Gannon & Vincent Touzé, 2006. "Insurance and Optimal Growth," SciencePo Working papers Main halshs-00085181, HAL.
    • Handle: RePEc:hal:spmain:halshs-00085181
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    References listed on IDEAS

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