Insurance effect on economic growth – among economies in various phases of development

Abstract

Purpose The purpose of this paper is to explore the relationship between insurance and economic growth for six (developed, emerging and developing) countries over the period of 1980 to 2015. Design/methodology/approach The study applies panel auto-regressive distributed lagged (PMG/ARDL) method to examine long-term and short-term relationship between insurance and economic growth for the USA, the UK, China, India, Malaysia and Pakistan. Findings The authors concluded that there exists a positive and significant relationship between life insurance, non-life insurance, trade openness, stock-market development and economic growth in the long run as p-value is less than 5 per cent. This study also found a significant relationship between employment rate, banking development and economic growth for the long run but the direction is negative. Foreign direct investment shows an insignificant relationship with economic growth in the long run. The results highlighted a significant and positive relationship between non-life insurance and economic growth in the short-run for the USA, the UK, China, India, Malaysia and Pakistan. Moreover, the relationship between life insurance and economic growth is positive and significant for India, Pakistan and the UK. Results reveal a significant but a negative relationship between life insurance and economic growth for the USA, China and Malaysia. Research limitations/implications Analysis is performed for only six countries and results of these six might not represent the whole world. Practical implications This research would help policymaker to consider wider aspects of insurance rather than considering it complementary service industry. Social implications Every individual, today, spends a huge amount of funds to purchase insurance. He or she should be aware of the wider social impact of their spending apart from risk transferring. Originality/value Researchers recently shifted their focus to investigate the relationship between insurance and economic growth but the topic is still lacking sufficient literature and various knowledge gaps. The study is an attempt to contribute in terms of refinement of the already existing body of knowledge and to fill literature gap. In addition, apart from the insurance–economy relationship, very few empirical studies used financial, banking and stock market along with insurance, proxies to measure accurate insurance contribution. Another element of originality lies in the comparative analysis of developed, emerging and developing countries.

The Effect of Insurance Activity on per Capita Income in the Southern Mediterranean: An Empirical Analysis Using Jordan as a Case Study

“…On the other hand, [11] found a positive and significant effect of aggregate and non-life insurance activity on economic growth, while the relationship was negative for life insurance activity. A recent study by [19] in six countries which differed in terms of economic development showed a significant positive relationship between insurance penetration and per capita income. The study also found a significant positive relationship with economic growth for non-life insurance as measured by net written premiums, penetration rate and density.…”

The Development of Foreign Capital Insurance Market, FDI and Economic Growth in China

“…Su Chi-Wei et al [11] examined the relationship between insurance development and economic growth using the bootstrap panel Granger causality test, finding two-way Granger causality between life insurance and macroeconomics in high-income countries. Rudra P. Pradhan et al [12] used Granger causality [17] and Sajid Mohy Ul Din et al [18] believed that life insurance had a positive effect on economic growth when the time selection rate and productivity of human capital were sufficiently low or for India, Pakistan There are more studies on the relationship between insurance and economic growth, but less on the relationship between the development of insurance market and economic growth, while the research on the development of foreign capital insurance market and economic growth in China is a blank.…”

Investment Activity of Insurers and the State Economic Growth

“…At that in the long term, there is a negative correlation between foreign direct investment, the development of banking services and economic growth. The authors concluded that insurance is not only a service industry, it is a huge investment potential of the economy (Ul Din et al, 2017a). It is interesting to study the dynamic impact of financial institutions on economic growth based on the data from 13 European Union countries (Wu et al, 2010).…”