China’s Expanding Social Assistance Programs and “fragmented Authoritarianism”
Abstract: There are two puzzles regarding to the urban unemployment in China. First, coverage of unemployment insurance is still very low compared to other social insurances. Second, the number of registered urban unemployed is much less than actual urban unemployed. This paper argues that the crowding-out effect between social assistance programs and unemployment insurance in China are among answers of above two puzzles. Government expenditure for the major social assistance program “Minimum Livelihood Guarantee Scheme” (“Dibao”) in urban China, which is managed by Ministry of Civil Affairs, increased from RMB2.2 billion in 2000 to RMB67.4 billion in 2012. Besides Dibao, some complementary social assistance programs such as medical assistance, education assistance and housing assistance are managed by different government departments who are in charge of health, education, housing policies etc. In this paper, we use two city-level datasets over 280 cities in China between year 2003 and 2009. We find that increasing social assistance expenditure are likely to reduce the number of registered unemployed, which implies some urban residents claiming social assistance are either leaving the labor market or had evaded from contribution for the unemployment insurance. Many urban residents do not enrol with unemployment insurance because the benefits from Dibao and other social assistance programs are higher than the benefit of unemployment insurance. Our paper suggests that the crowding out effect is a result of lack of coordination across different government departments. In the literature, the “fragmented authoritarianism” framework has been employed to explain the ineffectiveness of economic policy making in China. In this framework, each department is individually rational while the policy outcomes are collectively inefficient. We argue that the “fragmented authoritarianism” can be explained by the concept “political property rights” in New Institutional Economics.
