The impact of declined social insurance contribution rate on enterprise total factor productivity: Evidence from China

This paper examines the effect of declined social insurance contribution rate on total factor productivity. Taking listed companies in China as observation samples, we show a positive association between the social security payment rate decrease and total factor productivity. Further, we find that financing constraints play a strengthening role in diminishing social insurance contribution rate to increase firm productivity, and the effect is more pronounced for companies with higher financing constraints. This results also suggest that the reduction of social insurance contribution rate on the change of total factor productivity varies from different regions, ownership and industries, among which the central and western regions, state-owned enterprises and manufacturing enterprises have a relatively stronger effect on the improvement of productivity. Our study empirically tests the policy effect of lowering the social insurance contribution rate, and provides important implications related to the government formulating the phased social insurance fee reduction policy.