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Do social security contributions affect firms’ pollution discharges? Evidence from collection reforms in China

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  • Chao Zhang

    (Fuzhou University, School of Economics and Management
    Xiamen University, School of Management)

  • Peilin Wu

    (Fuzhou University, School of Economics and Management)

  • Weijun Lu

    (Zhejiang University of Finance and Economics, School of Public Finance and Taxation)

Abstract

This paper examines how reduced employer-borne social security contributions affect firms’ pollution emissions, using the quasi-natural experiment of China’s social security collection reforms as the identification strategy. We find that the reforms increase pollution emissions through the decrease in employer social security contributions. By lowering labor costs, the reforms encourage firms to substitute low-skill labor for capital investment, technology adoption and technological innovation. The effects of collection reforms on firms’ pollution emissions are more pronounced for highly labor-intensive firms, non-SOEs, and firms with limited cost-transfer capability. Our findings highlight that, despite reducing short-term financial burdens, the reforms may unintentionally steer firms toward more pollution-intensive development paths.

Suggested Citation

  • Chao Zhang & Peilin Wu & Weijun Lu, 2025. "Do social security contributions affect firms’ pollution discharges? Evidence from collection reforms in China," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 27(12), pages 31015-31042, December.
    • Handle: RePEc:spr:endesu:v:27:y:2025:i:12:d:10.1007_s10668-025-06914-w
    DOI: 10.1007/s10668-025-06914-w
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    JEL classification:

    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation

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