Empirical Study On The Economic Externality Of Chinese Insurance Industry

ABSTRACT:The study of externality is a hot issue in the study of economics.Its appearance in the field of finance in recent years has become a reliable empirical method revealing the causal relationship between financial development and economic growth. Insurance industry,as an important part of the modern financial system, whose economic spillover is remarkable, makes a positive contribution to promote the economic growth,so the empirical research on its spillover mechanism and performance is one of the focus of the research at home and abroad. Specific to the Chinese insurance industry,it presents exuberant vitality and its significant externality during the development process. Therefore, an empirical study on the economic externality of Chinese insurance industry possesses high value of theory study and practical applications.In the first part, this paper conducts a comprehensive analysis and evaluation on the development of Chinese insurance industry,and there is also an empirical inspection showing the economic externality through the correlation of the insurance industry and economic growth.Then this paper illustrates the principle of the economic externality in insurance industry from the perspective of industrial function, and it studies the spillover paths and the overflow channels respectively based on the two departments Feder model and the development model of precautionary savings theory,to build up the economic externality spillover mechanism model for Chinese insurance industry.On the basis of theoretical analysis, this paper obtains a large amount of raw data in24provinces and regions in our country through a wide range of questionnaire survey and verifies the rationality of the models above by a detailed data analysis and a empirical test result of Logit binary discrete model, which reveals the externality characteristics of the overflow in the present economic of Chinese insurance industry.Then this paper carries on an empirical research on the production externality in Chinese insurance industry with the Panel Data from31provinces throughout the country in2003to2012of,on the basis of the theory development of two departments of the Feder model with Panel Data model of two departments.The results show that the insurance can significantly affects the output of the non-insurance sectors,whose coefficient of the insurance industry production spillover effect is0.1142. And by introducing this important influencing factors insurance consumption, it builds VAR model based on the precautionary savings theory, using the annual time series data in1980to2010of the consumption externalities in Chinese insurance industry for empirical research, whose results shows that insurance can effectively promote the growth of consumption and income by5%steadily in the long term.This paper can draw the main following conclusions:(1) The economic externality is rooted in the three big industrial functions,which are the economic compensation, financing and social management function,deriving a series of spillover effect such as the risk control,loss reduction,efficiency improvement, and trade promotion,investment expansion, innovation promotion, resource optimization, deepening the financial,consumption promotion,domestic demand expansion, better employment and social security,quality improvement,ecological management and harmonious society and so on.(2) Empirical research shows that the spillovers of scale economy,investment,consumption, technology, knowledge and human resources are the main spillover channels.(3) The empirical evidence based on two department Panel Data model shows that the insurance as an important production input will significantly influence the output of non-insurance departments, and accordingly it promotes economic growth.By calculation for the insurance sector, every1%increase in insurance inputs will lead to0.1142%growth of national economic which results from spillover of the insurance production.(4) The empirical evidence based on the precautionary savings theory of the VAR model shows that insurance release the precautionary savings of the whole society by reducing individual economic uncertainty in the future to improve the conversion efficiency from saving to investment. The increase of insurance consumption in the short term will bring0.09rise of social marginal propensity to consume,and in the long term it promotes social consumption by5%steadily.The innovations of this paper are as follows:(1) It has constructed a comprehensive economic externality research system for Chinese insurance industry for the first time which has developed the theory in financial field;(2) It has conducted an extensive questionnaire and investigation on the economic externality for Chinese insurance industry, and has empirically tested it with discrete binary Logit model, showing the economic externality characteristics of the Chinese insurance industry;(3) This paper has also extended the Feder two departments model and the precautionary savings theory correspondingly, and on this basis it has carried on empirical research with two departments Panel Data model and the VAR model of the production and consumption externalities for Chinese insurance industry.