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Insurance and Optimal Growth

Author

Listed:
  • Frédéric Gannon

    (Centre d'Etude et de Recherche en Economie et Gestion Logistique (Université du Havre))

  • Vincent Touze

    (Observatoire français des conjonctures économiques)

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 Touze, 2007. "Insurance and Optimal Growth," Sciences Po publications info:hdl:2441/4422, Sciences Po.
    • Handle: RePEc:spo:wpmain:info:hdl:2441/4422
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    References listed on IDEAS

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