Social Insurance Contribution Rate Reduction Policy and Enterprise Innovation: Evidence from China

Abstract

Taking the enforcement of the Notice on the Phased Reduction of Social Insurance Contribution Rates as a quasi-natural experiment, the impact of the reduction policy of social insurance contribution rates on enterprise innovation was examined with a difference-in-difference (DID) model based on the data of A-share listed companies from 2007 to 2018 in China. Our study revealed that the implementation of the policy significantly boosted enterprise innovation. In addition, tests of potential mechanisms indicated that implementing the policy greatly reduced the actual social insurance contribution of enterprises and released more funds, thus promoting the innovation of enterprises. This study of the relationship between social insurance contribution rates and enterprise innovation proved that further implementation of policies to reduce taxes and fees could alleviate burdens on enterprises and stimulate innovation.