Cost pressure or innovation-driven? Social insurance and firm exporting

The intensifying competition in the international market has led some developing countries to reduce their labor protection standards in an effort to mitigate corporate cost pressures and enhance export performance. However, does labor protection genuinely impede export performance? In this context, this study investigates the relationship between labor protection and exports through the lens of social insurance, utilizing panel data from Chinese listed companies spanning 2012 to 2018. The empirical findings reveal the following: (1) Regarding the transmission mechanisms, enhanced social insurance standards can influence exports via two opposing channels. On one hand, higher social insurance standards may increase labor costs, thereby reducing export volume; on the other hand, they may encourage firms and employees to “positively reciprocate” through increased R&D efforts, ultimately boosting exports. (2) The empirical evidence demonstrates that the overall effect of social insurance on exports is positive, indicating that the benefits derived from heightened R&D activities in Chinese firms outweigh the negative impact of increased costs on export performance. This positive correlation is particularly evident in capital-intensive industries and general trade.