Life Insurance, Human Capital Accumulation and Economic Growth

Abstract

We compare growth rates in the absence and presence of life insurance using an overlapping generations framework with human capital accumulation to clarify how life insurance contributes to economic growth through the education investment of individuals depending on economic circumstances.Our results show that, as expected, the growth rate is higher when there is life insurance if the rate of time preference or the productivity of human capital accumulation is sufficiently low and if the income loss induced from lifetime uncertainty is moderate. However, if the income loss is sufficiently large, the growth rate is lower when there is life insurance.

Development of financial market activities and economic growth: A cross-country evidence

“…The OLG model assumes households in the economy may be 'infinitely lived' (overlapping generations) with full altruism linking generations within the household when making decisions to purchase products/services such as, life insurance policy. Lu and Yanagihara (2013) use two-period overlapping generations model and find economic growth rate is higher when there is life insurance available and the rate of time preference or the productivity of human capital is low. However, empirical estimation of OLG growth model is beyond the scope and purpose of this study.…”

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.…”

Human capital accumulation, income protection insurance and poverty reduction in the least developed countries

“…In this paper, we investigate how the effects of IPI change as the coverage of IPI changes. Lu and Yanagihara (2013) have investigated the effects of IPI under the assumption that all risks will be covered, and individuals cannot leave some risks uncovered. It will be meaningful, both theoretically and in reality, to incorporate "coverage" into their model.…”

“…Individuals will face uncertainty in the future, which may influence their income (Fuster, 1999; Levhari & Weiss, 1974). For example, even if they invest in human capital, there is a risk that they will fall ill in the future and lose their working ability (Lu & Yanagihara, 2013). As a result, they cannot realise their human capital.…”

“…In a word, individuals are at least partially guaranteed that they can get their income according to their human capital no matter what happens. Under that guarantee, individuals may be more willing to invest in education or training instead of increasing current consumption (Lu & Yanagihara, 2013). We can denote that effect as the “guarantee effect.”…”