A note on life insurance, human capital accumulation and economic growth

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Abstract

The purpose of this paper is to identify the conditions necessary for the effective functioning of disability insurance in the framework of an overlapping-generations model. Unlike preceding studies, we focus on demographic trends and differences in productivity between young and old workers. Our model implies that the effects of a young or old population on economic growth vary depending on whether peer effects on the process of human capital formation are positive or negative. If a positive peer effect is dominant and either the young or old population is small, economic growth might be higher when disability insurance is available than when it is not. Our results provide important suggestions for governments of the least developed countries in which insurance markets are either non-existent or underdeveloped.

Original languageEnglish
JournalApplied Economics Letters
DOIs
Publication statusAccepted/In press - 2021

Keywords

  • Disability insurance
  • depopulation
  • economic growth
  • human capital productivity
  • peer effects

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