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Firm Compliance with Social Insurance Obligations where there is a Weak Surveillance and Enforcement Mechanism: Empirical Evidence from Shanghai

Author

Listed:
  • Pushkar Maitra
  • Ingrid Nielsen
  • Chris Nyland
  • Russell Smyth
  • Cherrie Zhu

Abstract

This paper draws on a unique data set collected in audits in 2001 and 2002 by the Bureau of Labour and Social Security in Shanghai to examine why firms in Shanghai comply or over-comply with social insurance obligations in a regulatory environment where the expected punishment for non-compliance is low. Drawing on Harrington (1988), we test two hypotheses. The first hypothesis is that based on the first audit, the BOLSS will segment firms into low (non-aggressive) and high (aggressive) categories and those in the high category will be more likely to be re-audited. The second hypothesis is that if the identified non-complier is re-audited, it will be more likely to comply with its social insurance obligations in order to be returned from the high (aggressive) category into the low (non aggressive) category. Our first main finding is that firms found to be in non-compliance in the first audit in 2001 were moved into a separate violation category and the probability of being reaudited in 2002 was significantly higher if the firm was in that category. Our second main result is that across the board, firms which were reaudited continued to underpay in 2002 but the extent of underpayment was significantly reduced.

Suggested Citation

  • Pushkar Maitra & Ingrid Nielsen & Chris Nyland & Russell Smyth & Cherrie Zhu, 2005. "Firm Compliance with Social Insurance Obligations where there is a Weak Surveillance and Enforcement Mechanism: Empirical Evidence from Shanghai," Monash Economics Working Papers 13/05, Monash University, Department of Economics.
    • Handle: RePEc:mos:moswps:2005-13
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    File URL: http://www.buseco.monash.edu.au/eco/research/papers/2005/
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    Cited by:

    1. Nielsen, Ingrid & Smyth, Russell, 2008. "Who bears the burden of employer compliance with social security contributions? Evidence from Chinese firm level data," China Economic Review, Elsevier, vol. 19(2), pages 230-244, June.
    2. Wen Xin & Russell Smyth, 2010. "Economic Openness and Subjective Well‐being in China," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 18(2), pages 22-40, March.
    3. Cheng, Zhiming, 2022. "Communist Party branch and labour rights: Evidence from Chinese entrepreneurs," China Economic Review, Elsevier, vol. 71(C).
    4. Russell Smyth & Ingrid Nielsen & Qingguo Zhai, 2010. "Personal Well-being in Urban China," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 95(2), pages 231-251, January.
    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. Cousins, Mel, 2022. "Elective social insurance systems in developing East and South-East Asian countries," MPRA Paper 114078, University Library of Munich, Germany.
    7. Rickne, Johanna, 2013. "Labor market conditions and social insurance in China," China Economic Review, Elsevier, vol. 27(C), pages 52-68.
    8. Wei Cui & Jeffrey Hicks & Max Norton, 2022. "How well-targeted are payroll tax cuts as a response to COVID-19? evidence from China," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 29(5), pages 1321-1347, October.
    9. He, Qiyang & Qiu, Buhui, 2025. "Environmental enforcement actions and corporate green innovation," Journal of Corporate Finance, Elsevier, vol. 91(C).

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    Keywords

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    JEL classification:

    • H83 - Public Economics - - Miscellaneous Issues - - - Public Administration
    • K20 - Law and Economics - - Regulation and Business Law - - - General
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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