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Dynamic cost productivity and economies of scale of Ghanaian insurers

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Abstract

Previous insurance efficiency studies have focused on cost efficiency or static and dynamic technical productivity and therefore ignored dynamic cost productivity. Previous studies have also failed to consider economies of scale at the firm level. This study employs a panel data of insurers to assess the dynamic cost productivity growth in Ghana from 2005 to 2014. We also explore the determinants of cost productivity growth in the Ghanaian insurance industry. We find that the introduction of the Insurance Act of 2006 saw some large cost productivity growths; however, since 2012 the industry has been facing some marginal cost productivity decline. The cost improving policies in the Act that encouraged cost efficiency must be revisited by regulators, as it seems that the industry is going back to the pre-regulation cost environment. Additionally, not many insurers have been operating at the optimal production scale over the period.

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Fig. 1

Source Authors’ Construct (2016) based on Maniadakis and Thanassoulis (2004)

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Acknowledgements

The authors would like to express their sincere gratitude to the referees and the Editor-in-Chief of this journal for their important comments and suggestions on earlier drafts. We also express our appreciation to David Mensah Otoo for all support provided.

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Authors and Affiliations

  1. Department of Operations and Management Information Systems, University of Ghana Business School, P.O. Box LG 78, Legon, Ghana

    Kwaku Ohene-Asare & Charles Turkson

  2. Department of Business Administration, Presbyterian University College, Abetifi, Ghana

    Jones Kofi Anyimadu Asare

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  1. Kwaku Ohene-Asare
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  2. Jones Kofi Anyimadu Asare
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  3. Charles Turkson
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Correspondence to Kwaku Ohene-Asare.

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Ohene-Asare, K., Asare, J.K.A. & Turkson, C. Dynamic cost productivity and economies of scale of Ghanaian insurers. Geneva Pap Risk Insur Issues Pract 44, 148–177 (2019). https://doi.org/10.1057/s41288-018-0111-6

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