The Impact Of Economic Globalization On The Level Of Social Security

The impact of economic globalization on social insurance level can be explained by two major hypotheses, compensation hypothesis and efficiency hypothesis. Compensation hypothesis believes that globalization will reduce social insurance level while efficiency hypothesis holds a contending perspective that social insurance level will go up thanks to the economic globalization. To date, most papers in this study field focused on OECD countries and the few studies on LCD countries did not include China. This paper can provide evidences from China. This study mostly addresses the effects of economic globalization on Chinese cross-provincial social insurance differences by using two measurement dimensions, the ratio of social security and welfare expenditure to GDP and the ratio of social insurance spending to GDP. By using the data from 2000 to 2007 of thirty provinces, findings can be illustrated as follows:globalization has negative effects on social security and welfare expenditure and social insurance level, especially on pension insurance level. While trade has a significant effect, FDI effect is a little insignificant. But human capital can change the negative effect of trade on social insurance level. Compensation effects become stronger in regions with higher human capital level. For instance, as trade volume is relatively larger in eastern provinces, the ratio of pension insurance spending to GDP as a whole is, other things being equal,12% lower than the other provinces. However, in eastern provinces where human capital is higher, the trade effect gradually becomes positive. Similar conclusions can be draw when the measurement dimension is government social security and welfare expenditure. The political implication of this paper is that it's highly necessary to weigh both security function and its effects on area competitiveness when choosing an appropriate social insurance level during economic globalization and integration.