Government Subsidy Policies and Corporate Social Responsibility

Abstract

With the rapid development of economy, the issue of CSR (corporate social responsibility) has become the focus, and the great importance is attached to the establishment of a socially responsible supply chain. How could the government design subsidy policies so as to raise CSR in a supply chain? To this end, three decision models consisting of the government, a manufacturer and a retailer are established respectively under different subsidy policies. We explore the impacts of the government subsidy on the members' profits, the CSR effort level, and social welfare. The results show that when the government only subsidizes the manufacturer (the retailer), retailer's (manufacturer's) profit increases in the manufacturer's (retailer's) CSR effort. However, when the government subsidizes the manufacturer and the retailer simultaneously, only the retailer's profit increases in the manufacturer's CSR effort. No matter which subsidy policy is adopted, continually increasing subsidies cannot promote the sustainable development of the supply chain but will harm social welfare. Besides, the equilibrium subsidy rate is positively related to the external effect coefficient. By the comparison of three subsidy policies, subsidizing both of the manufacturer and the retailer is the best one for the supply chain and the social welfare, followed by subsidizing the retailer only and subsidizing the manufacturer only, respectively.