The Influence Of Social Insurance Payment Rate Ginseng Behavior Of The Enterprise

Payroll tax on one hand increases the operation cost of the firm. While on the other hand, it also promotes productivity in the workers. This article estimates the impact of payroll tax rate on firms’ behavior of participating in social security system, using firm level data in Shanghai. The variation of payroll tax rate between firms in the rural area and those in the urban area makes us able to find that lowering the payroll tax rate would increase the level of participation. This effect varies with different level of human capitals among firms. For firms possessing relatively low human capitals, lowering payroll tax rate promotes participation in the system even more. However, this impact is not significant for those firms with relatively high human capitals. One policy implication for this finding is that establishing a social security system with a much lower payroll tax rate for the firms would help to increase the coverage of this system, while the demand for higher level of insurance could always be supplemented with optional higher payment.