The dynamics of unemployment insurance coverage in Chinese cities : Preliminary results (2012-2018)

Abstract

Despite the rise in scholarly interest directed towards social protection in China in recent years, unemployment insurance remains an understudied topic. Over- all, coverage has been rising, but this process remains largely unexplained. This study proposes four hypotheses from different theoretical perspectives, linking unemployment insurance coverage to socio-economic development, economic interdependence, state capacity, and employment and skills. The hypotheses are tested via fixed effects regression on panel data of Chinese prefectural cities, which allows more comprehensive and detailed analyses than previous studies. The results indicate that increases in local population coverage are driven by an increasing scope of formal employment and rising fiscal capacity. Rising eco- nomic interdependence, conversely, erodes population coverage. The difference between de jure and de facto coverage, approximated here through formal sec- tor coverage, is influenced by structural change in the formal urban labor market. Rising employment in skill-intensive services and rising administrative capacity increase coverage. The study’s main contribution is an insight into the dynamics of social protection in China since 2012, and shedding light on the increasingly important unemployment insurance and on the crucial role of local governments. The study explains the results in the context of labor market polarization and a changing impact of economic interdependence.