Empirical Analysis Of The Effect Of China’s Insurance On Economic Growth

The study of relation between insurance industry and economic growth originated in1970’s when western scholars researched the relation between financial development and economic growth. With the rapid development of insurance industry, insurance industry is playing an important role in the economic development. The researchers begin to pay close attention to the relationship between the insurance industry development and economic. However, there are different conclusions about the relation between the insurance industry and economic growth. Some researchers support the point of’supply-leading’that means the development of insurance industry promoting economic growth. But some other researchers support the point of’demand-following’that means economic growth leading to demand for insurance services and promoting the development of the insurance. Through the analysis of these studies, as an important factor the level of economic development is not considered, that is the mean cause of the divergence on the search conclusions. According to the course of the development of insurance industry which was drawn by Carter&Dickinson (1992), the relationship between insurance depth and per capita GDP should be’S’curve. It means the relationship between the developments of insurance industry and economic is different under diverse economic level. But most of the researchers haven’t considered it. In addition, because the function of life insurance is different from non-life insurance, they have different effects on economic growth. As a means of savings life insurance mainly promotes economic growth by the function on accommodation of funds. However, non-life insurance is more focus on the risk transfer and economic compensation to influence the economic growth. Many researchers did not take the difference into account.On the basis of predecessors’ research, this paper firstly introduces the development of insurance industry of our country, including the development history, the scale and structure of insurance industry, and the factors that influence the development of insurance industry. Then it analyses the theory role of the development of insurance industry in economic growth from three aspects:the function on risk transfer and economic compensation, financing function and social management function of insurance. Next, it establishes a new economic growth model considering the insurance factor and other key variables on the basis of Solow growth model. Using the generalized moment estimation method, this paper investigated the relationship between the insurance industry development and economic growth from both the level and the rate of economic growth, based on the panel data of30provinces and cities in the last12years. The result shows that, with the improvement of economic, the insurance industry’s positive effect on economic growth is more and more obvious. It is different in life insurance and non-life insurance. For life insurance, it has the most obvious positive effect both from the perspective of the level and rate of economic growth in the regions with the medium-level economic. For non-life insurance, from the perspective of level of economic growth, it has the most obvious positive effect in the regions with low-level economic; from the perspective of the rate of economic growth, it has the most obvious positive effect in the regions with high-level economic.This paper points out that the difference is due to the development of non-life insurance is more unbalanced than life insurance and the influence to economic growth is more instable. The empirical results also show that the insurance lag effect on economic growth has to do with economic level. Life and non-life insurance has a lagging effect on economic growth, although the early stage of the life of the impact on economic growth is negative, the early stage of the non-life insurance is positive, but with the improvement of economic level, hysteresis are gradually disappearing.