Abstract
The purpose of this paper is to examine the impact of insurance and economic growth, with empirical analysis for the Republic of Macedonia. We apply multiple regression and control for other relevant determinants of economic growth. The analysis used data for the period 1995 - 2010. In order to solve the model in the analysis will use the technique of least squares, followed by analysis of variability in order to identify the effects of each variable. Insurance development is measured by insurance penetration (insurance premiums in percentage of GDP). We used three different insurance variables - life insurance, non-life insurance and total insurance penetration. According to our findings, insurance sector development positively and significantly affects economic growth. The results are confirmed in terms of non-life insurance, and, total insurance, while the results show that life insurance negatively affect economic growth.
Highlights
According to the financegrowth nexus theory financial development promotes economic growth through channels of marginal productivity of capital, efficiency of channeling saving to investment, saving rate and technological innovation Levine (1997)
The functions include the provision of means for clearing and settling payments to facilitate the exchange of goods, the provision of a mechanism for pooling resources, services and assets, and the subdivision of shares in various enterprises, risk management, resource allocation price information to help coordinate decentralized decision making in various sectors of the economy, and the means to deal with the incentive problems created when one party of a financial transaction has the information that the other party does not, or when one party acts as an agent of the other Merton and Bodie (1995)
Empirical research conducted by King and Levine (1993) about the impact of the banking sector on the development of the economy showed that the banking sector contributes to economic growth and that there is a positive causal relationship between banking sector and economic growth (Levine, 1997; Levine, Loayza, and Beck, 2000)
Summary
0,4 0,146217 others examine the effect of capital market development as well (e.g. Arena, 2008). Factors that we use as control variables that may explain economic growth include the following: penetration for nonlife, life and total insurance, GDP percapita, private credit, government spending, export, education, investment, inflation and the reform index. (GDP growth)it = αi + β1(Non life insurance penetration)it + β2(GDP per capita)it + β3(Private credit)it + β4(Export it + β5(Investment))it + β6(Education))it + β7(Government spending it + β8(Inflation)it + β9(Reform index)it +uit (2). (GDP growth)it = αi + β1( Life insurance penetration)it + β2(GDP per capita)it + β3(Private credit)it + β4(Export it + β5(Investment))it + β6(Education))it + β7(Government spending it + β8(Inflation)it + β9(Reform index)it +uit (3). While the null hypothesis of the unitroot was rejected for four of the twelve variables, the obtained results indicate that there was a unit root in total insurance penetration, non life insurance penetration, life insurance penetration, GDP per capita, private credit, export, investment and education.
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