Health insurance, liquidity and growth

Within the context of an endogenous growth model, it is shown that in the p resence of health risks which influence household income, the introduction of a private insurance company increases the long-term economic growth rate . The introduction of such an institution has two effects on savings: a lev el effect and a composition effect. Although the presence of this risk-redu cing institution induces a decrease in the level of total savings, as sugge sted in earlier papers, the rate of illiquid savings, which contribute to g rowth, increases.