Firm Compliance, State Enforcement and Social Insurance Coverage in China

Abstract

How did China achieve remarkable expansion in social insurance coverage in recent years? The significant social insurance coverage expansion in China since the mid-first decade of the twenty-first century appears to counter the findings of a substantial segment of the policy implementation literature, which portrays local governments as lacking enforcement capabilities and incentives. This study argues that firm compliance plays a crucial role in driving social insurance coverage expansion. It employs a novel strategy to verify the aforementioned argument by investigating informal sector workers’ social insurance enrolment status. Analysis of nationally representative survey data reveals that firm compliance emerges as a key factor. Although this study shows that state enforcement does not directly impact coverage expansion, it also establishes that the likelihood of firm compliance increases with the anticipated severity of government sanctions. These findings enhance the understanding of the roles of the state and firms in the expansion of social insurance coverage in China.