Insurance, Pensions, and Mutual Funds on Economic Growth

Ramoutar, Richard. S (2025): Insurance, Pensions, and Mutual Funds on Economic Growth.

Abstract

Earlier studies examining the impact of insurance sector activity on economic growth have produced mixed and often inconclusive results. This study re-examines the growth effects of financial development by jointly analyzing life insurance premium volume, non-life insurance premium volume, insurance company assets, pension fund assets, and mutual fund assets. Using annual panel data for 33 developed and developing countries over the period 2000--2016, we apply a panel Autoregressive Distributed Lag (ARDL) framework employing the Pooled Mean Group (PMG) and Mean Group (MG) estimators. The results provide robust evidence of cointegration among the variables and indicate that insurance sector development and mutual fund assets have a positive, statistically significant impact on economic growth in both the short- and long-run. These findings highlight the importance of contractual savings institutions as key channels through which financial development supports long-term economic performance.

• Item Type: MPRA Paper
• Language: English
• Keywords: Insurance markets, Pension funds, Mutual funds, Financial development, Economic growth, Panel ARDL, PMG, MG
• Subjects: G - Financial Economics > G1 - General Financial Markets > G15 - International Financial Markets; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development

References

Adams, M., Andersson, J., & Lindmark, M. (2009). The historical relation between banking, insurance, and economic growth in Sweden: 1830–1998. Journal of Financial Services Research, 35(2), 113–129. https://doi.org/10.1007/s10693-009-0057-3

Bailliu, J., & Reisen, H. (2000). Do funded pensions contribute to higher aggregate savings? A cross-country analysis. In H. Reisen (Ed.), Pensions, savings and capital flows: From ageing to emerging markets (pp. 113–131). OECD.

Beck, T., & Levine, R. (2004). Stock markets, banks, and growth: Panel evidence. Journal of Banking & Finance, 28(3), 423–442. https://doi.org/10.1016/S0378-4266(02)00408-9

Beenstock, M., Dickinson, G., & Khajuria, S. (1986). The determination of life premiums: An international cross-section analysis, 1970–1981. Insurance: Mathematics and Economics, 5(4), 261–270. https://doi.org/10.1016/0167-6687(86)90020-X

Demirgüç-Kunt, A., & Levine, R. (1996). Stock markets, corporate finance, and economic growth: An overview. World Bank Economic Review, 10(2), 223–239. https://doi.org/10.1093/wber/10.2.223

Dorfman, M. S. (2008). Introduction to risk management and insurance (9th ed.). Pearson Education.

Gertler, M. (1988). Financial structure and aggregate economic activity: An overview. Journal of Money, Credit and Banking, 20(3), 559–588. https://doi.org/10.2307/1992535

Haiss, P., & Sümegi, K. (2008). The relationship between insurance and economic growth in Europe: A theoretical and empirical analysis. Empirica, 35(4), 405–431. https://doi.org/10.1007/s10663-008-9075-2

Impavido, G., & Tower, I. (2009). How the financial crisis affects pensions and insurance and why the impacts matter (IMF Working Paper No. WP/09/151). International Monetary Fund.

King, R. G., & Levine, R. (1993). Finance and growth: Schumpeter might be right. Quarterly Journal of Economics, 108(3), 717–737. https://doi.org/10.2307/2118406

Kugler, M., & Ofoghi, R. (2005). Does insurance promote economic growth? Evidence from the UK. In Proceedings of the Money Macro and Finance Research Group Conference, University of Crete, Rethymno, Greece.

Levine, R. (1999). Financial development and growth: Where do we stand? Estudios de Economía, 26(2), 113–136.

Levine, R., & Zervos, S. (1998). Stock markets, banks, and economic growth. American Economic Review, 88(3), 537–558.

Neusser, K., & Kugler, M. (1998). Manufacturing growth and financial development: Evidence from OECD countries. Review of Economics and Statistics, 80(4), 638–646. https://doi.org/10.1162/003465398557726

Pagano, M. (1993). Financial markets and growth: An overview. European Economic Review, 37(2–3), 613–622. https://doi.org/10.1016/0014-2921(93)90051-B

Pesaran, M. H., Shin, Y., & Smith, R. (1999). Pooled mean group estimation of dynamic heterogeneous panels. Journal of the American Statistical Association, 94(446), 621–634. https://doi.org/10.1080/01621459.1999.10474156

Pesaran, M. H., & Smith, R. (1995). Estimating long-run relationships from dynamic heterogeneous panels. Journal of Econometrics, 68(1), 79–113. https://doi.org/10.1016/0304-4076(94)01644-F

Rejda, G. E. (2005). Principles of risk management and insurance (9th ed.). Pearson Education.

Richterkova, A., & Korab, P. (2013). Impact of insurance sector activity on economic growth—A meta-analysis. Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, 61(7), 2677–2683. https://doi.org/10.11118/actaun201361072677

Samwick, A. (1998). Is pension reform conducive to higher saving? Paper presented at the World Bank Saving Workshop, Washington, DC.

Skipper, H. D. (1997). Foreign insurers in emerging markets: Issues and concerns (Occasional Paper). Center for Risk Management and Insurance.

Skipper, H. D., & Kwon, W. J. (2007). Risk management and insurance: Perspectives in a global economy. Blackwell Publishing.

Ward, D., & Zurbruegg, R. (2000). Does insurance promote economic growth? Evidence from OECD countries. Journal of Risk and Insurance, 67(4), 489–506. https://doi.org/10.2307/253847

Webb, I., Grace, M. F., & Skipper, H. D. (2002). The effect of banking and insurance on the growth of capital and output (Working Paper). Center for Risk Management and Insurance.

Zweifel, P., & Eisen, R. (2012). Insurance economics (2nd ed.). Springer.