Law and the Demand for Property-Casualty Insurance Consumption

Neil Esho (neil.esho@bis.org), Anatoly Kirievsky, Damian Ward and Ralf Zurbruegg (ralf.zurbrugg@adelaide.edu.au)
Additional contact information
Anatoly Kirievsky: School of Banking and Finance, The University of New South Wales, Australia
Damian Ward: Bradford University, Bradford West, United Kingdom
Ralf Zurbruegg: School of Commerce, University of Adelaide, Australia

No 2003-14, Centre for International Economic Studies Working Papers from University of Adelaide, Centre for International Economic Studies

Abstract: This paper examines the importance of legal rights and enforcement in influencing property-casualty insurance consumption. We extend the existing literature by examining the role of legal factors in determining insurance density across countries. Also, measures of risk aversion, loss probability and price, which overcome limitations of proxies used in the existing literature on insurance demand are analysed. Using a panel data set we apply a Generalized Methods of Moments dynamic system estimator, which relaxes the assumption of strict exogeneity of the regressors and produces unbiased and efficient estimates. The results show a strong positive relationship between the protection of property rights and insurance consumption, which is robust to various model specifications and estimation techniques. Moreover, the results show the purchase of property-casualty insurance is significantly and positively related to loss probability and income, as well as providing weaker evidence of a negative relationship with price.

Pages: 36 pages
Date: 2003-05
References: View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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