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Estimating the Incidences of the Recent Pension Reform in China: Evidence from 100,000 Manufacturers

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  • Zhigang Li
  • Minqin Wu

Abstract

An ongoing reform in China mandates employers to contribute significant amounts to employee pension funds. The current study estimates the impact of this reform on the wage, employment and performance of firms using data from over 140,000 medium and large manufacturers in China during 2004 and 2006. We find that the nominal wages of employees were rigid but their real wages may have declined due to the pension reform. In addition, we find an interesting dichotomy in the incidences of pension reform. In localities with high agglomeration levels, firms\' profits declined because the pension burden could not be fully transferred to employees. In less agglomerated jurisdictions, firms responded positively to pension reform, possibly because local governments over-subsidized the pension costs as a way to attract investment.

Suggested Citation

  • Zhigang Li & Minqin Wu, 2011. "Estimating the Incidences of the Recent Pension Reform in China: Evidence from 100,000 Manufacturers," Working Papers 1138, BBVA Bank, Economic Research Department.
    • Handle: RePEc:bbv:wpaper:1138
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    References listed on IDEAS

    as
    1. Angel De la Fuente & Jose Emilio Bosca, 2011. "Gasto educativo por regiones y niveles en 2005," Working Papers 1119, BBVA Bank, Economic Research Department.
    2. Javier Alonso & Jasmina Bjeletic & Carlos Herrera & Soledad Hormazabal & Ivonne Ordonez & Carolina Romero & David Tuesta & Alfonso Ugarte Ruiz, 2010. "Projections of the Impact of Pension Funds on Investment in Infrastructure and Growth in Latin America," Working Papers 1002, BBVA Bank, Economic Research Department.
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    Cited by:

    1. Pang, Zhaofeng & Zhou, Ming, 2024. "Social security contributions and corporate outsourcing," Finance Research Letters, Elsevier, vol. 65(C).
    2. Wenjing Bi & Yifei Li & Xiaotao Zhang & Tenglong Zhong, 2024. "Labor protection and enterprise digital transformation: A quasi‐natural experiment based on the enforcement of Social Insurance Law in China," Economics and Politics, Wiley Blackwell, vol. 36(2), pages 708-733, July.
    3. Liu, Guanchun & Liu, Yuanyuan & Zhang, Chengsi & Zhu, Yueteng, 2021. "Social insurance law and corporate financing decisions in China," Journal of Economic Behavior & Organization, Elsevier, vol. 190(C), pages 816-837.
    4. Yao, Wenyun & Lu, Feier & Wang, Yuting & Song, Zilong, 2023. "Social insurance contributions and firms' debt concentration choice: A quasi-natural experiment based on the implementation of China's social insurance law," Pacific-Basin Finance Journal, Elsevier, vol. 79(C).
    5. Li, Xiaoxue & Tian, Liu, 2020. "The effect of non-employment-based health insurance program on firm's offering of health insurance: Evidence from the social health insurance system in China," Journal of Comparative Economics, Elsevier, vol. 48(4), pages 997-1010.
    6. Anping Chen & Marlon Boarnet & Mark Partridge & Bin R. Chen & Mingqin Wu, 2014. "Industrial Agglomeration And Employer Compliance With Social Security Contribution: Evidence From China," Journal of Regional Science, Wiley Blackwell, vol. 54(4), pages 586-605, September.
    7. Li, Zhigang & Wu, Mingqin, 2018. "Education and welfare program compliance: Firm-level evidence from a pension reform in China," China Economic Review, Elsevier, vol. 48(C), pages 1-13.

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    More about this item

    Keywords

    China; Pension; incidence;
    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
    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor

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