The Effect of Insurance Activity on per Capita Income in the Southern Mediterranean: An Empirical Analysis Using Jordan as a Case Study
2019
This study examines the
effects of insurance activity on per capita income in the case of a southern
Mediterranean country (Jordan) over the period 1990-2017 using an
Autoregressive Distributed Lag (ARDL) cointegration analysis to describe the
dynamic long relationship between per capita income and insurance activity. It
provides empirical evidence that insurance sector activity, measured by
insurance investment, had a negative and significant effect on per capita
income in Jordan during the studied period. However, it was also found that the
negative effects of insurance sector activity on growth were limited by other
economic policies which hamper per capita growth, such as inflation. The study
recommends that more diversification of insurance products is necessary
and that new markets need to be explored in order for insurance companies in
southern Mediterranean countries to compete in international markets. Although
there are several agreements between Mediterranean countries, negotiations on
minimizing restrictions on insurance company activities could be done through
easing procedures, reducing costs and enhancing future economic relations by
exploring new economic relations or by building on current protocol and trade
agreements. Furthermore, the study notes that policymakers in southern Mediterranean countries must aim for a well-developed insurance sector so
that its activity can contribute to economic growth through mobilizing national
saving to finance long-term investment projects. More attention should be paid
throughout the region to insurance sector
activities while conducting financial sector analysis and macroeconomic
policy design.
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