Threshold Effects of PM2.5 on Pension Contributions: A Fuzzy Regression Discontinuity Design and Machine Learning Approach

Air pollution risk significantly impacts social and economic systems. Given the critical role of the pension system in socioeconomic stability, it is crucial to explore the impact of air pollution on pension contributions. Utilizing panel data from eight Chinese provinces between 2014 and 2024, this study quantifies the impact of Particulate Matter (PM2.5) on pension contributions and explores its nonlinear and lagged effects through a fuzzy regression discontinuity design (FRDD) coupled with double machine learning (DML) techniques. Through the application of the FRDD, we found that pension contributions are significantly reduced when the PM2.5 concentration exceeds the standard annual threshold of 35 µg/m3, and the effects differ between the Urban Employees Basic Pension Insurance (UEBPI) and the Urban and Rural Residents’ Pension Scheme (URRPS). Further, the DML approach validated these findings and suggested that a complex hysteresis response mechanism exists in relation to air pollution. Additionally, it indicated that when PM2.5 concentrations do not exceed the threshold, this similarly has a negative effect on pension contributions. These findings emphasize the need for policymakers and pension fund managers to integrate environmental considerations into pension sustainability strategies to increase resilience to ongoing environmental risks.