**_Participation in Health and Unemployment Insurance_ .** The combined pension contribution rate for the “mandatory” employer-based pension is 28 percent (20 percent from the employer and 8 percent from the employee). Apart from the pension, employer and employee also each make contributions to health and unemployment insurance. While employees and employers should be participating in all social insurance programs, evidence from the CULS suggests high correlation, but some differences across these programs. We thus re-estimate the models (1) for participation in health and unemployment insurance, and present results in Appendix Tables A.4 and A.5. Most of the results highlighted above for pension participation are similar for health and unemployment insurance, except there is less evidence of gender differences in health insurance coverage, even before controlling for industry and ownership sector.

**_Does the “Tax Wedge” Influence Participation Decisions?_** As noted earlier, one significant feature of China’s enterprise-based urban worker social insurance scheme is the specification of a minimum contribution level set at 60 percent of the local average wage. This provision introduces a kink at 60 percent and implies that the “labor tax wedge” is higher for low income workers. In order to characterize the relationship between the labor tax wedge and social insurance coverage, we include estimates of the worker-specific labor tax wedge in models of participation in the worker pension program. Further, because local and migrant workers may face different expectations as to the benefits of participating in the pension, we estimate models separately for the two groups.

Results shown in Table 7 suggest that local _hukou_ workers facing a higher labor tax wedge are less likely to be covered, but that there is no impact on participation of migrant workers. A one percent increase in the labor tax wedge is associated with a 0.24 percent reduction in the probability that a local _hukou_ employee will participate in the urban worker pension, and this magnitude decreases to 0.14 percent reduction with a full set of industry and enterprise controls included. Somewhat surprisingly, however, we find no relationship between the labor tax wedge and participation of migrant workers. This suggests that higher ability migrants who are earning high incomes, and face a lower labor tax wedge, are no more likely to participate in employer-based pensions than workers earning less than 60 percent of the average local wage. Lower wage local _hukou_ residents and their employers, however, respond more readily to disincentives created by the kink in the labor tax wedge.<sup>41</sup> What factors explain this difference? The 20 percent employer contribution to the social pooling account in the pension program has a 15-year vesting period. As the program is now structured, a worker who moves out of a city has access to the 8 percent individual contribution, but loses 88 percent of the

> 41 We must properly view these results as descriptive. Lower ability workers, with both lower incomes and employers who may avoid paying benefits, may have less recognition of the potential value of a pension (the may discount the future at a higher rate).

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