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Unintended environmental gains: The impact of social insurance contribution cut on corporate carbon emission reduction

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  • Su, Junjia
  • Xiang, Lijin
  • Si, Deng-Kui

Abstract

This study evaluates the environmental impact of a fiscal reform, particularly focusing on the effects of social insurance contribution reductions, within the context of China's commitment to sustainable economic development. A quasi-natural experiment setup from a 2009 policy adjustment in Zhejiang Province reducing the basic old-age insurance (BOI) contribution rates has been utilized to conduct a Difference-in-Differences (DID) analysis. Using data from the National Tax Survey Database, the estimation indicates that a substantial decline in corporate carbon emissions attributable to the policy, with government environmental governance further enhancing its effectiveness through positive moderation. The policy supports low-carbon development effectively across firms of varying sizes, particularly impacting non-power generation enterprises with a notable reduction in carbon emissions. The results hold across various robustness checks. The analysissuggests that the policy eases financial constraints on enterprises, thereby facilitating additional investments in energy conservation and environmental protection. Furthermore, the policy boosts corporate profitability, enhances employment, and reduces the intensity of carbon emissions. This study presents valuable insights for policymakers aiming to align economic growth with environmental sustainability.

Suggested Citation

  • Su, Junjia & Xiang, Lijin & Si, Deng-Kui, 2025. "Unintended environmental gains: The impact of social insurance contribution cut on corporate carbon emission reduction," Economic Analysis and Policy, Elsevier, vol. 86(C), pages 1839-1857.
    • Handle: RePEc:eee:ecanpo:v:86:y:2025:i:c:p:1839-1857
    DOI: 10.1016/j.eap.2025.05.022
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    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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