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Compensating for Instability? Economic Openness, Threat of Social Unrest, and Welfare Provision in China

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Abstract

How does increased integration to the global economy affect patterns of social provision at the local level? This study investigates the impact of economic openness on the subnational variation of welfare provision in China. Examining welfare expansion as a political response to provincial economic integration, I analyze how the effect of globalization on welfare expansion is conditioned by the threat of social unrest. Using a panel dataset on 31 provinces in China from 2001 to 2015, I find that provinces with open economies and higher threat of social unrest provide broader social insurance coverage. On the other hand, provinces with similar levels of economic openness but with lower levels of social unrest are associated with lower levels of coverage. These findings suggest that provincial governments may be more likely to utilize social policy instruments to compensate for the social costs of globalization, particularly in cases where exposure to the international market leads to increased social instability and discontent.

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Notes

  1. Because the number of labor disputes may not fully capture collective actions, strikes, or violent unrests, I also use labor strikes and government spending on public security as alternative measures of social unrest. The China Labor Bulletin provides the number of labor strikes that happened in each province from 2011 to 2015, while the China Statistical Yearbook provides data on provincial government spending on public security from 2007 to 2015. When using the number of labor strikes and public security spending as alternative measures for social unrest, the interaction between labor strikes and trade openness as well as the interaction between public security spending and trade openness consistently have statistically significant effects on the coverage of pension, health insurance, and unemployment insurance. Refer to Table 4 in the Appendix for results.

  2. Because the statistics from the Hausman (1978) test also suggest using the REM instead of FEM, I report results from the REM in the text.

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Table 4 Regression results of alternative measures for social unrest on welfare coverage, random effects
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Hwang, I.H. Compensating for Instability? Economic Openness, Threat of Social Unrest, and Welfare Provision in China. St Comp Int Dev 57, 171–197 (2022). https://doi.org/10.1007/s12116-022-09349-w

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