The Impact of Government Subsidies on Private Pension Enterprises: A Decision-Making Model Based on Their CSR Levels

Abstract

With a rapidly aging society, the Chinese pension industry has faced great pressure due to the increasing demand for elderly care and medical products. Due to the limited resources and capabilities of Chinese social organizations, which currently play an important role in elderly care, it is necessary to encourage more private enterprises to enter the pension industry and thus provide significantly more products to all elderly people. This study aimed to explore the extent to which government subsidies may incentivize private enterprises to enter the pension industry. In contrast to previous studies, the level of corporate social responsibility (CSR), social value, and service quality of an enterprise were considered in this study as factors that influence the decision of whether to enter the pension industry. By constructing a theoretical model, three different government subsidy strategies, namely, no subsidy, subsidy to enterprises, and subsidy to consumers, were analyzed, especially their impacts on the social and economic values of enterprises. Our theoretical and simulation results show that the impact of government subsidies is related to its level of CSR. As the CSR level is relatively high, it is more effective to grant subsidies to customers than to enterprises. Moreover, by comparing the optimal price, service quality, and demand of the three subsidy strategies, we find that subsidies to enterprises and customers will lead to the highest service quality and highest market demand, respectively.