ABSTRACT
This chapter examines the following two hypotheses: the Expansion Hypothesis and Localisation Hypothesis. It presents the micro-foundations from municipal officials' conference speeches before applying statistical techniques to test the Expansion Hypothesis and Localisation Hypothesis. The chapter provides micro-foundations by discovering agents' preferences and behaviours before testing the macro-level associations. The micro picture shows that Chinese municipal leaders adopt the expansionary pension policy to foster local industrialisation in the inter-municipal competition in economic development. China's pension reform coincided with the reform of the state sector in the urban areas, which started tentatively in mid-1980s and saw more fundamental restructuring launched in 1997. "Factor guarantee", as municipal leaders call it in their speeches, refers to the municipal government's commitment to secure the supply of various kinds of production input factors for local employers and potential investors. Chinese municipal officials clearly perceive the pressure to outperform their counterparts in the province in generating economic growth and fiscal revenue.
