Strong State, Weak Enforcement: Bureaucratic Forbearance of China's Social Insurance Policies *

Abstract

Why would a strong authoritarian state choose not to enforce its own policy? We extend the theory of forbearance to the authoritarian context and highlight different incentives and characteristics of forbearance. In the context of China's modern social insurance system, we argue that local officials have career incentives to allow firms to evade insurance taxes. Specifically, promotion-seeking local officials under severe interjurisdictional competitions tend to forgo firms' social insurance payments in the hope of better economic performance and career prospects. These effects of officials' promotional pressure on social insurance forbearance are most significant among domestic private firms and foreign firms. We conduct the first systematic analysis of firm-level social insurance contributions in an authoritarian context and offer additional evidence from individual-level survey data. Our paper shows that bureaucratic forbearance of China's social insurance policies has a pro-business bias, which undermined the policies originally designed to address inequalities during market reforms.

Keywords: forbearance, weak enforcement, social insurance, redistribution, China