Study On The Relationship Between Insurance And Economic Growth

Form the risk management function of insurance, this article studies the relationships between life/nonlife insurance and economic growth, expecially the promotion of life/nonlife insurance to economic growth. To complete the study, the article is divided into two parts:the life insurance part and the nonlife insurance part.In the life insurance part, we firstly discussed the individual’s demand for life insurance, solved the optimal proportions of expenditure on life insurance and further compared the individual’s saving rates with or without life insurance. Based on the above micro study of individual’s behavior, we secondly, built an economic growth model with life insurance embedded, simulated the economic growth path and the steady state of the economy. Finally, we incorporated financial markets with frictions and inhomogenous individuals into the economic growth model with life insurance, built a formation model of financial structure on the investment supply side and discussed the relationship between financial structure and economic growth.In the nonlife insurance part, we firstly built risk economic growth model assuming the capital stock suffers property damage risks, and then built risk-insurance economic growth model in which property insurance is introduced to manage the risks. Comparing the risk-free model, the risk one and the risk-insurance one, we discussed detailly the influences of risk and insurance on economy. Following similarly steps, the article discussed the relationship between profit loss insurance and output, and aplied the conclusion into the analysis of crop insurance.With the above studies, the article obtained the following conclusions:In the life insurance part, the article showed that life insurance is very important to individual, and the output of our model is consistent with the actual data, expecially explaining the individual’s life insurance demand. Besides, we found that the introduction of life insurance increases the individual’s saving rate, which means the economic growth in an endogenous economy. The economic growth model with life insurance in our article exhibited good characteristics and showed that life insurance is very important to economic growth. The model with fraction and inhomogenous individuals concluded that the developments of the capital markets decide the financial structure in an economy, which further influences the economic growth.In the nonllife insurance part, the study of property insurance pointed out that introduction of property damage risks is detrimental to economy and introduction of property insurance reverses the negatively effects. Further, a relatively optimal state is solved, in which a capital level and an insurance purchase come up together to maximize households’lifetime utility. The study of crop insurance concluded the similar results:the introduction of agricltural risks is detrimental to agricultural economy and introduction of crop insurance reverses the negatively effects. In addition, there was an optimal premium subsidy to crop insurance maximizing the economic output because of the externality of agriculture.Specifically, the contents of each chapter are as follows:Chapter1is the introduction section, introducing the issues, backgrounds, methods, contents and donotions of our paper. Chapterl points out that insurance is very important to economy, but the relationship between insurance and eocomy has not been studied fully, and the promotion of insurance to economy has not been uncovered. This artcle employed the standard economic methods to study the relationship between insurance and economy, keeping our eyes on the promotion of insurance to economy.Chapter2-5is the life insurance section. Chapter2builds the overlapping generation model with survival risk and the consideration of intergenerational transfer payments, and studies the individual’s demand of pension and life insurance. Chapter2assumes no bequest motives, which means that life insurance is bought to mange risks of human capital investment. Chapter2shows that life insurance is very important to individual, and the output of our model is consistent with the actual data, expecially explaining the individual’s life insurance demand. Besides, we found that the introduction of life insurance increases the individual’s saving rate, which means the economic growth in an endogenous economy. Chapter3alters the assumption of bequest motives in Chapter2, assuming that individuals have bequest motives, and the motives of buying life insurance is to leave bequests to offspring. Chapter3shows that, the new model perfects the study in Chapter2, further explains the individual’s demand for life insurance. Similarly, comparing the new models with or without insurance, Chapter3also believes that life insurance increases individual’s saving rate. Another interesting conclusion is that purchasing life insurance is the main (only) way of leaving bequests.From the micro studies of Chapter2and Chapter3, Chapter4builds the relationship between life insurance and economic growth. Chapter4shows that pension is a way of capital formation and is very important to economy. This chapter explains the running mode, the economic growth path and the steady states of the economy with life insurance.Chapter5introduces fractional capital markets and inhomogenous individuals into the economic growth model in Chapter4, builds the formation model of financial structure, and discusses the relationship between financial structure and economy growth, expecially the promotion of pension market to economic growth. The study shows that, friction costs influence financial structure and economy development.Chapter6-7is the nonlife insurance section. Chapter6discusses the relationship between property insurance and economy, assuming capital stock suffers property damage risks and then introducing property insurance to manage the risks. The study points out that introduction of property damage risks is detrimental to economy and introduction of property insurance reverses the negatively effects.Chapter7discusses the relationship between profit loss insurance and output, assuming output suffers profit loss risks and then introducing profit loss insurance to manage the risks. Chapter7shows that introduction of profit loss risks is detrimental to economy and introduction of profit loss insurance reverses the negatively effects. In addition, we further apply the above conclusions into the analysis of crop insurance, and obtain the contributions of crop insurance to agricultural economy.The last chapter, Chapter8, concludes the dissertation and summarizes the future research directions. In this dissertation, we introduce risks and then insurance to study the promotion of insurance to economy. The way of thinking dominates the full text and is also a choice to study the relationship between insurance and economy. In this way, the relationship between insurance and economy will be made clearer.