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| Provincial Pooling Reform of Basic Endowment Insurance and Labor Mobility within Provinces: Theory and Empirical Evidence |
| WANG Wei, XU Jiayao
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| School of Public Economics and Administration, Shanghai University of Finance and Economics |
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Abstract The basic endowment insurance system is a crucial factor influencing labor mobility. In the 1990s, China established a basic endowment insurance system for enterprise employees, starting at the city (or county) level. Due to historical factors, this system is characterized by fragmentation. Different regions develop their own basic endowment insurance policies based on local conditions, resulting in significant disparities such as in contribution burdens, benefit levels, payment methods, and financial status in different areas. Increasing the level of basic endowment insurance pooling has been a clear objective since the establishment of China's social security system. In recent years, China has gradually accelerated the pace of basic endowment insurance pooling reform, completing provincial pooling reform in 2021 and initiating national pooling reform. Existing literature suggests that basic endowment insurance pooling reform, through institutional unification, will promote labor mobility. However, it often overlooks the fact that such reform can also affect labor mobility by influencing regional disparities in basic endowment insurance contribution rates, wages and basic endowment insurance benefits. Moreover, in practice, two models have been implemented—the adjustment fund system and the unified collection and allocation model—but their impacts on labor mobility have not been adequately explored. In light of the ongoing national pooling reform for basic endowment insurance, examining the impact of increased pooling levels on labor mobility is of significant theoretical and practical importance.
Drawing on existing literature and China’s past reform practices, and considering that intra-provincial mobility dominates domestic migration and is directly affected by provincial pooling reform, this paper examines how the reform influences intra-provincial labor mobility. We explore several key questions: First, does the reform promote or hinder mobility? Are the effects heterogeneous across age cohorts?Second, do different models of pooling reform yield varying effects on labor mobility？ Third, how can we deeper understand the mechanisms through which the mobility？
To this end, the paper constructs an overlapping generations model that incorporates improvements in basic endowment insurance pooling levels and the timing of labor mobility, theoretically exploring the mechanisms through which pooling reform influences labor mobility. Leveraging provincial pooling reform as a quasi-natural experiment, we empirically examine how the reform affects intra-provincial labor mobility using data from the China Migrants Dynamic Survey and a difference-in-differences model.
The main findings are as follows: (1)Provincial pooling reform has enhanced the portability of basic endowment insurance rights, promoting labor mobility. It also led to the convergence of regional contribution rates and a narrowing of interregional wage disparities, but did not result in a significant reduction in overall labor mobility. (2) Compared to the provincial pooling reform based on the adjustment fund system, the complete pooling reform with unified collection and allocation has a greater impact on labor mobility. (3) The effects of provincial pooling reform differ across age groups: the enhanced portability of basic endowment insurance rights has a greater influence on the mobility of older workers, whereas the narrowing of wage disparities has a more substantial effect on the mobility of younger workers.
This paper makes several important contributions. First, the paper theoretically analyzes both the portability of basic endowment insurance rights and the wage disparity mechanisms in the context of basic endowment insurance pooling reform, and reveals that the impact of increased pooling levels on labor mobility depends on the relative strength of these mechanisms. It provides new insights into the comprehensive understanding of how basic endowment insurance pooling reform influences labor mobility. Second, existing literature pays little attention to how pooling reform affects the mobility of workers at different age stages and the mechanisms involved. This paper incorporates the level of basic endowment insurance portability into an overlapping generations model that accounts for the timing of labor mobility, in order to capture the impact of basic endowment insurance rights losses on labor mobility decisions.This contributes to a deeper theoretical understanding of the different effects of pooling reform on the mobility of workers at different stages of their life cycle. Finally, the findings of this study offer valuable insights for improving the institutional design of the national pooling reform and promoting labor mobility. This study suggests that, in advancing the national pooling reform, the government must carefully consider significant regional disparities in economic development, demographic structures and the financial pressures of basic endowment insurance fund payments. In light of these realities, it is essential to adopt a more flexible and adaptable institutional design to better balance equity and efficiency. This approach will not only improve China's basic endowment insurance system but also align regional development interests, enhance the efficiency of labor resource allocation, and thus advance the construction of a unified national market.
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Received: 15 January 2024
Published: 02 January 2025
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