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

Qianwen Zheng, Zilan Liu and Yunxiao Zhang

Economic Analysis and Policy, 2024, vol. 84, issue C, 1690-1713

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.

Keywords: Public pension; Statutory contribution rate; Actual contribution rate; Total factor productivity (search for similar items in EconPapers)
JEL-codes: H32 H55 J21 J24 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecanpo:v:84:y:2024:i:c:p:1690-1713

DOI: 10.1016/j.eap.2024.10.032

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