Abstract
Work-related injury insurance (WII) has undergone a long period of rapid growth in China. Therefore, its sustainability, funding, and system of payments deserve serious attention. By analyzing the changes of the numbers of insured, the number of compensated, and the cumulative balance of WII Fund, this article systematically reviews and summarizes the various stages of the development of WII in China. The relationship between the WII Fund’s revenue and expenditure between 1997 and 2018 is analyzed using statistical methods, including the augmented Dickey–Fuller (ADF) unit root test, the cointegration test, the Granger causality test and an error correction model. Since 1996, China’s WII has been repeatedly adjusted and constantly growing. Our empirical evidence shows that there is a long-term equilibrium and cointegration relationship between the WII Fund’s revenue and expenditure. Revenue is the Granger cause of expenditure, but it does not conform to the fund-raising principle. WII Fund has a large accumulated balance over the years, which violates the principles of fund management and has caused considerable controversy. China’s WII has undergone several regulatory upgrades and management mode adjustments to better ensure its sustainable development. The fund has maintained a basic balance of revenue and expenditure. Nevertheless, at present, China’s WII Fund is facing the pressure of declining fund balance and, as such, medium- and long-term development risks deserve careful attention. As there is no sufficient literature on WII Fund management, this study is a valuable contribution to the existing body of knowledge.
Highlights
More and more countries in some way guarantee compensation for occupational injuries and diseases, for political, economic, and historical reasons, different countries have adopted a variety of approaches to establishing work-related injury insurance (WII) systems
The empirical research method of this article comprises four parts: (a) The augmented Dickey–Fuller (ADF) method is used to test the stationarity of two variables; (b) The EngleGranger (EG) two-step method is used to test the cointegration relationship between variables; (c) An error correction model (ECM) is established for instances where variables pass the cointegration test; and (d) The Granger causality test is used to test the causality between two variables
This shows that when the revenue of the WII Fund deviates from the long-term equilibrium level, the nonequilibrium state will be brought back to equilibrium state with a 70.2% adjustment
Summary
More and more countries in some way guarantee compensation for occupational injuries and diseases, for political, economic, and historical reasons, different countries have adopted a variety of approaches to establishing work-related injury insurance (WII) systems. The WII funds are coordinated and managed by national governments in majority of the countries; only few countries have developed WII funds managed by commercial organizations. Germany and Japan have adopted the former management mode, while the United States adopts the latter mode (Shin et al, 2011). These are reflected in the significant differences in insurance institutions, funding sources, and compensation standard. In the early years of its existence, the enterprises which participated in WII were mainly state owned and large scale
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