Social Security Burden,Innovation Squeeze and Firms'Productivity:Based on the Reform of Social Security Premium Collection
Tax department imposes social security fees with full responsibility can standardize the social security fees'collection system.However,strengthening social security collection will in-crease tax burden on firms and squeeze out their innovation investment,which is not conducive to productivity improvement.In 2019,China began to fully implement a policy which assigns full responsibility to the tax department for the collection of social security fees.Since 2000,Guang-dong,Zhejiang,Fujian,Hainan,Liaoning and Hunan have successively completed this policy pilot.Based on the data of Annual Survey of Industrial Firms from 1998 to 2013,this paper ap-plies the difference-in-difference model(DID)to evaluate the impact of the reform on firm total factor productivity.The results indicate that the reform significantly reduces firm total factor pro-ductivity(TFP).After the implementation of the policy,the TFP of enterprises decreased by 16%on average.Furthermore,this paper examines the mechanisms through which the policy af-fects TFP.The results show that the reform leads to higher employment cost,reduced cash flow,thereby deepening the financing constraints of enterprises,then reducing both input and output of innovation.The conclusion of this paper suggests that alongside the standardization of the social security fee collection system under the reform which assigns tax department full responsibility for the collection of social security fees,the potential negative impact of increased tax burden on firm productivity should be carefully considered as well.
tax department imposes social security fees with full responsibilitytotal factor pro-ductivityfinancing constraintsinnovation squeeze
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