Analysis of the Supervision of Ecological Subsidies: Based on the Principal-agent Model

Abstract

In view of the problem of the invalidity of the incentive mechanism of the ecological subsidies, which is due to the information asymmetry between the government``s supervision and the enterprise endeavor to fulfill their ecological responsibilities, this paper attempts to analyze the supervision of ecological subsidies based on the Principal-agent Model. Two conclusions are drawn: firstly, the government``s supervision regarding the effect of the enterprises`` fulfilling the ecological responsibilities can significantly reduce the information asymmetry; secondly, the government``s incentive strength and the enterprises`` endeavor level of fulfilling the ecological responsibilities are both improving the surveillance dynamics. Here is the suggestion: with the increasing of the surveillance dynamics of the government and the transparency of the enterprises`` fulfilling the ecological responsibilities, the government should meanwhile increase the subsidies incentive strength, therefore, to promote the effort level of the enterprises`` fulfilling the ecological responsibilities to approach to the Pareto optimal value.