Industrial Agglomeration and Employer Compliance With Social Security Contribution: Evidence From China

Abstract

This paper, by using annual surveys of Chinese manufacturing firms from 2001 to 2007, investigates the relationship between industrial agglomeration and employer compliance with required pension contributions. The result of panel fixed‐effect estimation shows that in the more agglomerated industrial areas, firms comply with pension mandates at a higher level. Our finding is robust to various specifications and estimations employing instrumental variables.

What determines pension insurance participation in China? Triangulation and the intertwined relationship among employers, employees and the government

“…Developing economies tend to possess less mature institutional systems, which are often characterized by weak enforcement of labor contracts and government policies (Chen & Wu, 2014). Studies on the labor market in developing economies tend to indicate that formal sectors (mostly referring to State/Public-owned firms and foreign-owned firms) experience more thorough and effective policy implementation than informal sectors (Nyland, Thomson & Zhu, 2011;Xu, Guan & Yao, 2011), and that this is usually reflected by a positive wage premium of the former group over the latter.…”

“…They identified five concerns expressed by employers based on their perceptions of and responses to policies and regulations: construction of an effective policy, level playing field, cost control, firm reputation, and recruitment and retention. Chen and Wu (2014), who investigated the relationship between industrial agglomeration and employer compliance with required pension contributions, found that in more agglomerated industrial areas, firms were more likely to comply with pension mandates.…”

How Do Supply Chain Networks Affect the Resilience of Firms to Natural Disasters? Evidence From the Great East Japan Earthquake

“…Since Marshall (), it has been believed that the agglomeration of firms and workers improves firm productivity and reduces production costs through input sharing, knowledge spillovers, and labor pooling (Bhat, Paleti, and Singh, ; Jofre‐Monseny, Marín‐López, and Viladecans‐Marsal, ; Duranton and Puga, ). Recently, Chen and Wu () find that industrial agglomeration benefits employees through a higher level of employer compliance to pension contribution in China. Our finding that supply chain networks within the region promote medium‐term recovery from natural disasters suggests that the positive effects of agglomeration function effectively even in the aftermath of disasters.…”

Regional Competition, Agglomeration, and Housing Markets in China

“…Chen and Wu () explore the linkages between regional industrialization and employer‐provided pensions in China. They use annual survey data from Chinese manufacturing firms from 2001 to 2007, covering about 190,000 firms each year.…”

“…Hence, this paper raises important policy questions related to whether tax competition is causing a "race to bottom" and on the theoretical side, the role of identification in spatial econometric modeling (Gibbons and Overman, 2012). Chen and Wu (2014) explore the linkages between regional industrialization and employer-provided pensions in China. They use annual survey data from Chinese manufacturing firms from 2001 to 2007, covering about 190,000 firms each year.…”