Insurance and Optimal Growth

Frédéric Gannon and Vincent Touzé

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Abstract: The aim of this paper is to propose a theoretical connection between insurance and economic growth. We develop a simple model to insert microeconomically founded optimal insurance with moral hazard in a standard macroeconomic framework of optimal growth. We characterize the long-run equilibrium, the global dynamics and the evolution of insurance coverage with time. Three types of trajectories are identified: first, a simple dynamics with permanent partial insurance or full insurance, second, one with regime switching converging to a steady state with full or partial insurance and, finally, one with mixed equilibrium.

Date: 2007-07
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Related works:
Working Paper: Insurance and Optimal Growth (2007)
Working Paper: Insurance and Optimal Growth (2006)
Working Paper: Insurance and Optimal Growth (2006)
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