Insurance development as a factor in long-term economic growth
Insurance development as a factor in long-term economic growth

Summary/Abstract: A substantial amount of theoretical and empirical literature suggests that, in addition to many other important factors, the long-term economic growth of a country is related to its level of financial de- velopment. According to theory, the channels through which financial development influences eco- nomic growth are the following: marginal productivity of capital, the saving-to-investment efficiency conversion, the saving rate, and technological innovation. The influence of economic growth is real- ized through the functions of financial intermediaries – the mobilization of savings, the reduction in the cost of capital through economies of scale and specialization, the provision of risk manage- ment and liquidity, the improvement of resource allocation. Insurance companies play a major role in these functions and thus should also play a major role in economic growth, as they are the main risk management resource for companies and individuals. Through the issuing of insurance policies they collect funds which are then transferred to deficit economic units for the financing of real in- vestment. Therefore, according to the theory, the insurance sector is one of the factors contributing to economic growth.This paper concerns the link between insurance development and economic growth theory, and discusses the possible contribution of insurance development to economic growth (using the theories of financial intermediation and endogenous growth as a basis). It also presents a review of empirical studies on the insurance-growth nexus. The research results show that insurance development, as a part of financial development, provides a positive effect on long-term economic growth.

• Details
• Contents