Insurance Development as a Catalyst for Productive Capacity Expansion in African Economies

ABSTRACT This study investigated the disaggregated and aggregated components of insurance development as a potent driver of Africa's productive capacity. The analysis covers 45 African countries over the period 2010–2020. The employed baseline empirical strategy is the dynamic panel Generalized Method of Moments (GMM), which accounts for simultaneity bias and unobserved heterogeneity, thereby addressing potential endogeneity concerns. To reinforce the robustness of the baseline estimations, the Lewbel Two‐Stage Least Squares (2SLS) approach is also applied. Across the various estimation techniques and some sets of sensitivity analysis, the findings reveal that life insurance, non‐life insurance, and their aggregate, which represents total insurance development, emerge as important factors for enhancing Africa's productive capacity. Secondly, results from the mediation analysis reveal that investment and technological innovation serve as the transmission channels through which insurance development enhances productive capacity in Africa. Further findings and policy implications are framed within the Sustainable Development Goals (SDGs) and Africa's Agenda 2063 to advance the region's productive capacity.