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The Sustainable Development and Expenditure: Revenues Nexus of the WII Fund in China

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  • Chengda Liu
  • Huiwen Zhou
  • Hui Liu

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.

Suggested Citation

  • Chengda Liu & Huiwen Zhou & Hui Liu, 2021. "The Sustainable Development and Expenditure: Revenues Nexus of the WII Fund in China," SAGE Open, , vol. 11(2), pages 21582440211, May.
    • Handle: RePEc:sae:sagope:v:11:y:2021:i:2:p:21582440211015418
    DOI: 10.1177/21582440211015418
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    References listed on IDEAS

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    1. Steven P. Clark & David C. Marlett & Faith R. Neale, 2018. "Regulatory Capture And Efficacy In Workers’ Compensation," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 85(3), pages 663-694, September.
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