Research on Local Government Moral Hazard and Central Government Contract Incentives in the Process of National Coordination of Basic Pension Insurance

Abstract

The Fifth Plenary Session of the 19th Central Committee mentioned that “realizing the national overall plan for basic old-age insurance” is one of the important contents of improving the social security system. This article analyzes the possible moral hazards of local governments in the national overall planning of basic pension insurance, and on this basis, studies how the central government encourages local governments to cooperate with the overall planning through contractual arrangements. The research shows that under the situation of information asymmetry, the central government has a principal-agent problem in the overall planning of basic pension insurance, and the central government’s contractual arrangements should adopt marginal incentives; under the situation of information symmetrical, overall planning can achieve the optimal level of welfare. The government's contractual arrangements should adopt fixed remuneration. This article proposes to promote the national overall planning of basic pension insurance from the aspects of the division of powers and responsibilities of the central and local governments, information acquisition, assessment rewards and punishments, and transitional measures.