engleski

Insurance Development and Economic Growth Nexus

According to endogenous growth theory well developed financial intermediation can promote economic growth affecting marginal productivity of capital, efficiency of channeling saving to investment, saving rate and technological innovation. While empirically studies in this area have mainly focused on banks, research on insurance companies has been largely ignored. In this paper we examine empirically if the insurance sector plays a growth-supporting role while controlling for other influences on economic growth. In order to provide the empirical evidence we specify simultaneous system of equations and apply a cross-country data analysis using data from 43 European countries for the 1995-2006 period. According to our results, life insurance development is significantly and positively related to economic growth. On the other hand, we do not find such evidence with non-life insurance.

life and non-life insurance; economic growth; theory of financial intermediation; endogenous growth theory; simultaneous equations

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