Insurance Use and Economic Growth in Latin America. Some Panel Data evidence/Aseguramiento Y Crecimiento Economico En America Latina. Evidencia a Partir De Datos De panel/Assurances et Croissance Economique En Amerique Latine. Une Etude a Partir Des Donnees De Panel

By Concha, Angela; Taborda, Rodrigo | Lecturas de Economia, July-December 2014 | Go to article overview

Insurance Use and Economic Growth in Latin America. Some Panel Data evidence/Aseguramiento Y Crecimiento Economico En America Latina. Evidencia a Partir De Datos De panel/Assurances et Croissance Economique En Amerique Latine. Une Etude a Partir Des Donnees De Panel


Concha, Angela, Taborda, Rodrigo, Lecturas de Economia


--Introduction.--I. Literature review on the relationship between economic growth and the financial and insurance industries.--II. Empirical strategy.--III. Data measurement and sources.--IV. Results.--Conclusions.--Bibliography.--Appendices.

Introduction

As a gear of the financial engine, the insurance industry fosters economic growth, working in tandem with other agents and regulatory institutions. The insurance sector: (i) Identifies and measures risk levels, discerning the costs of riskier activities and the efficient allocation of resources towards achieving enhanced productivity and risk-coverage; (ii) encourages risk-averse agents to take greater chances, thereby increasing their returns with respect to uninsured activities; (iii) averts adverse income shocks to both firms and households, thus stabilizing their consumption and expenditure paths; (iv) has become a major source of long-term and capital investment opportunities for shareholders (Skiper, 1997).

The relevance of the financial sector for economic growth has been studied empirically by analyzing the relationships between banking, stock markets and growth at country levels (Roubini and Sala-i-Martin, 1992; King and Levine, 1993; Levine and Zervos, 1998; Valickova, Havranek and Horvath, 2014), and at industry levels (Rajan and Zingales, 1998; Braun and Larrain, 2005). The studies that include the insurance sector are more recent (among them Webb, Grace and Skipper, 2002; Haiss and Sumegi, 2008; Arena, 2008). The basic finding has been the existence of a positive relationship between the financial and insurance sectors and economic growth; however, no agreement on a causal relationship has been reached.

To date, there are no studies on the relationship between insurance use and economic growth using data only for Latin American countries. Studying the region itself becomes important when the existing literature analyses Latin America as a subgroup of countries belonging to underdeveloped or low-income economies, mixed with Middle Eastern, Asian and South African countries. (1) However, economic growth in the last two decades has taken the region to an intermediate stage of development that deserves particular attention in studying the finance-growth and insurance-growth nexus (de la Torre, Ize and Schmukler, 2012). This paper provides evidence of such a relationship for a set of 11 countries within the region, between 1980 and 2009. The main estimation results suggest that a 10% increase in life, non-life and total insurance use has a positive association with per capita GDP, ranging from 0.05 to 0.08%. Moreover, and in line with the international evidence for developed countries, a two-way effect between the financial sector and the insurance sector with economic growth is found. The eventual choice between credit and insurance in adverse times could help explain such an effect.

After this introduction, the paper is organized as follows: In section I, the background literature developed over the last two decades is reviewed. Section II outlines the empirical strategy. Section III describes the data, the sources and additional procedures. In section IV, the main results are presented. And the last section provides some brief conclusions.

I. Literature review on the relationship between economic growth and the financial and insurance industries

While the insurance industry plays a key role in the financial sector, the relationship between the latter and economic growth has been widely researched over the last twenty years. Overall, the sector's positive impact on growth has been explained through two approaches: The capital accumulation view (Gurley and Shaw, 1955), and the total factor productivity perspective (Greenwood and Jovanovic, 1990; King and Levine, 1993).

Levine (1997) describes five tasks within the financial sector that have an impact on economic growth: 1) Efficient capital distribution; 2) the monitoring and promotion of corporate governance; 3) risk management and diversification; 4) savings accumulation; and 5) the trading of goods and services. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Note: primary sources have slightly different requirements for citation. Please see these guidelines for more information.

Cited article

Insurance Use and Economic Growth in Latin America. Some Panel Data evidence/Aseguramiento Y Crecimiento Economico En America Latina. Evidencia a Partir De Datos De panel/Assurances et Croissance Economique En Amerique Latine. Une Etude a Partir Des Donnees De Panel
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen
Items saved from this article
  • Highlights & Notes
  • Citations
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Search by... Author
    Show... All Results Primary Sources Peer-reviewed

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.