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Does public pension promote or inhibit enterprise total factor productivity? Evidence from China

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  • Zheng, Qianwen
  • Liu, Zilan
  • Zhang, Yunxiao

Abstract

The relationship between pension contribution rates and productivity remains a significant topic of discussion. This study utilizes micro-level data to examine the interaction between statutory pension contribution rates, actual contribution rates, and the total factor productivity (TFP) of enterprises. The findings indicate that the reduction in the Basic Old-age Insurance contribution rate resulted in a 0.985 percentage point decline in actual contribution rates and 4.3 percentage point decline in TFP. Pension insurance contribution collection by tax authorities results in the highest collection intensity and lowest elasticity coefficient, while agency collection exhibits greater variability. Additionally, actual pension contribution rates and TFP exhibit an inverted U-shaped relationship. When the public pension contribution rate is either too high or too low, it may hinder improvements in enterprise production efficiency. Instead, there exists an optimal range of contribution rates where public pensions can foster a positive interaction between R&D investment, capital-skill substitution, and employee incentives. State-owned, labor-intensive, and low-wage firms experience sharper productivity declines beyond a lower optimal contribution rate, indicating that these firms reach peak productivity at lower contribution levels.

Suggested Citation

  • Zheng, Qianwen & Liu, Zilan & Zhang, Yunxiao, 2024. "Does public pension promote or inhibit enterprise total factor productivity? Evidence from China," Economic Analysis and Policy, Elsevier, vol. 84(C), pages 1690-1713.
    • Handle: RePEc:eee:ecanpo:v:84:y:2024:i:c:p:1690-1713
    DOI: 10.1016/j.eap.2024.10.032
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    More about this item

    Keywords

    Public pension; Statutory contribution rate; Actual contribution rate; Total factor productivity;
    All these keywords.

    JEL classification:

    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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