Estimating Spillover Effects in Property Casualty Insurance Consumption
49 Pages Posted: 4 Jun 2020 Last revised: 12 Apr 2021
Date Written: May 6, 2020
The determinants of insurance consumption have been extensively studied, yet spatial correlations are rarely considered within this framework. In this paper, we discuss several channels through which spatial dependence may arise and then test for spatial dependence using six years (2009-2014) of province-level data from China. Results suggest that spatial spillover effects are large and have the potential to seriously bias marginal effect estimates if neglected. Specifically, when regions experience similar changes in determinants, marginal effect estimates in spatial models are roughly 1.5 times that implied by aspatial models. Moreover, the findings of this study demonstrate that properly modeling spatial dependence is of paramount importance in accurately assessing the impact of insurance consumption determinants.
Keywords: Spatial model, Insurance consumption, Spillover effect, China
JEL Classification: G01, G22, E22
Suggested Citation: Suggested Citation