To what extent is social security spending associated with enhanced firm-level performance? A case study of SMEs in Indonesia

Abstract

Although the relationship between social protection and enterprise performance is much debated in the literature, evidence is particularly limited in the case of small and medium-sized enterprises in developing economies. Using census data from 2010 to 2014, this article examines how the provision of social security influenced business performance in Indonesia. The author finds that increased social security spending of 10 per cent is associated with a per-worker revenue gain of up to 2 per cent. Moreover, profits are not found to decrease with increased social protection coverage, suggesting that increasing worker benefits may be a worthwhile business investment.