Abstract: The implementation of the Social Insurance Law of the People’s Republic of China in 2011, for the first time, explicitly required all enterprises to pay social insurance premiums for their employees in a legal form, significantly enhancing the enforcement of social insurance contributions by enterprises. The existing studies primarily focus on the impact of this reform at the firm level, while overlooking its transmission effects on the macroeconomic level. Based on the national tax survey data from 2007 to 2015, and using the implementation of the law in 2011 as an exogenous policy shock, this paper constructs a quasi-natural experiment study. The findings show that the enactment of this law has led to a 16.8% increase in total factor productivity among enterprises. The mechanism analysis reveals that the law primarily enhances TFP by incentivizing increased R&D investment, intensifying external competitive pressure within industries, and reinforcing the market-driven mechanism of survival of the fittest. Further analysis indicates that the law’s implementation not only optimizes factor allocation efficiency at the regional and industry levels but also fosters growth in macro-level TFP. The above conclusion indicates that the law, as the core system for regulating social security management, has not suppressed the development of enterprises, and has improved their productivity at the micro level and factor allocation efficiency at the macro level by enhancing their innovation capabilities and optimizing the market competition environment, thereby promoting the overall improvement of total factor productivity.

Key words: Social Insurance Law, total factor productivity, factor allocation, economic growth