n South African Journal of Economic and Management Sciences - Cost efficiency of African insurance companies using a finite mixture model
|Article Title||Cost efficiency of African insurance companies using a finite mixture model|
|© Publisher:||University of Pretoria|
|Journal||South African Journal of Economic and Management Sciences|
|Affiliations||1 Lisbon School of Economics and Management and 2 Federal University of Rio de Janeiro|
|Publication Date||Jan 2016|
|Pages||64 - 81|
|Keyword(s)||Africa, Insurance companies, Latent class model, Panel data, Stochastic cost frontier and Technical efficiency|
ISI Social Science
This paper evaluates the operational practices by African insurance companies from Angola and Mozambique, using a finite mixture model that allows controlling for unobserved heterogeneity. More precisely, a stochastic frontier latent class model is adopted in this research to estimate the cost frontiers for each of the different technologies embedded in this heterogeneity. This model not only enables the identification of different groups of African insurance companies from Angola and Mozambique, but it also permits the analysis of their cost efficiency. The results indicate the existence of three different technology groups in the sample, suggesting the need for different business strategies. The policy implications are also derived.
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