Demand Subsidies Research Articles

Attendance manipulation and efficiency in Chile’s school voucher system

To improve the quality of education, one can either directly reward performance or introduce school choice, private provision, and demand subsidies. The Chilean voucher scheme combines both approaches: an attendance-related subsidy favors school choice and creates incentives for schools to promote attendance throughout the year. With imperfect monitoring, however, institutions may respond by manipulating performance indicators. By analyzing audit data, we find evidence that a large fraction of Chilean schools – including public schools – over-report attendance, with a higher prevalence among for-profit and under-achieving institutions. Expenditure data suggest that manipulation among for-profit schools seems to follow rent extraction purposes rather than educational goals.

Economic and mathematical modeling of demand subsidies for photovoltaic technologies

Determining the need for resources of development institutions is formalized in the form of a multi-criteria decision-making problem, for the solutions of which the principle of sequential maximin is used. Development institutions are extremely important for the formation of supply and demand for scientific knowledge of photovoltaic systems to achieve global sustainable development goals, they are necessary for sustainable economic growth and diversification of the national innovation system. The main characteristics of the national innovation system that can affect subsidizing the demand for scientific knowledge are identified, changes in these characteristics are analyzed and a number of economic and mathematical models are constructed to predict the effectiveness of development institutions in the field of photovoltaic technologies. The definition of the resource needs of development institutions is formalized in the form of a multi-criteria decision-making task, for which the principle of sequential maximum is used.

Green energy subsidy structure design under the impact of conventional energy price uncertainty

In the practice of green energy promotion, consumers opt for cheaper but dirtier conventional substitutes, the green supplier faces heavy investment and demand uncertainty will be reluctant to provide until the majority of consumers choose green energy. Then, the government needs to design a subsidy structure that targets both sides of demand and supply to promote green energy. This paper presents a game-theoretic model to investigate the design of two-sided (supply and demand) green subsidies for the government with a target adoption level under the impact of uncertain demand caused by the volatility of conventional energy price. We quantified the optimal reaction of the green supplier modeled as a price-setting newsvendor and provide an optimal solution for government subsidies. We found that a supply subsidy incentivizes production by reducing the effective price and increasing the service level, whereas a demand subsidy only decreases the effective price. When we studied two special cases (uniform and triangular), we found that a supplier subsidy does not affect by uncertainty and decreases with the target level. We applied our model to design a shore power subsidy structure and found that a shipping company (demand) subsidy plays a more important role at low levels of fuel price uncertainty, whereas a port (supply) subsidy becomes more important at high levels of uncertainty. The port subsidy is an effective risk-sharing tool for the government when compared with the two-sided context and subsidizes only the shipping company.

The contribution of food subsidy policy to monetary policy in India

Food price volatility is a major threat for welfare, economic prosperity and political stability. The monetary authority is generally viewed in the literature as the only institution responsible for price stability, however this approach overlooks the importance of food price stabilization policies using fiscal instruments. We develop and estimate a Bayesian DSGE model that incorporates monetary and fiscal policy tailored to India, replicating food demand and food supply subsidies. We find that following a world food price shock, CPI and therefore interest rate volatility would be 21% higher in the absence of food subsidies. Putting this effect aside would lead to overestimating the effectiveness of inflation targeting by the central bank. Accordingly, we find that the subsidy policy has large heterogeneous distributional welfare effects: while farmers benefit from all subsidies, the inclusion of urban households into the demand subsidy program is required to offset supply subsidy welfare cost.

Thinking of Incentivizing Care? The Effect of Demand Subsidies on Informal Caregiving and Intergenerational Transfers

We show that demand side cash subsidies to care recipients alter both caregiving and intergenerational transfer decisions. We exploit a quasi-natural experiment referring to the inception of a universal caregiving allowance (in 2007 and its reduction in 2012). We find a caregiving subsidy (of a magnitude of 530€ in 2011) to increase the probability of informal caregiving by 32% (the intensity of care in 13.5 days/year). Similarly, we find that downstream (upstream) intergenerational transfers increased (decreased) in a magnitude of 29% (15%). The effects concentrate among middle and lower income households, and were attenuated by the reduction of the subsidy.

Financiación de la Educación en Colombia y Lógicas de Privatización en el Ciclo Obligatorio: del subsidio a la demanda a los ‘nuevos modos de gestión’

During the last three decades, public education policy in Colombia has been subjected to a series of measures aimed at its structural defunding, despite the normative advances in this area promoted by some articles of the 1991 Constitution. This article shows how the persistence of the structural de-financing of the educational basket, as well as the introduction of capitation as a modality of demand subsidy, have been determining factors for the incorporation of privatization logics in the provision of Preschool, Elementary and Secondary Education in Colombia.

Demand Subsidy versus Production Regulation: Development of New Energy Vehicles in a Competitive Environment

In the competitive market environment, the growth of new energy vehicles (NEVs) faces many obstacles. Demand subsidy or production regulation-related policies are widely used to promote the development of NEVs. A comparative analysis of the effects of the two types of policies on the competitive vehicle market requires further study. To fill this gap, we investigate which type of policy is more preferable from the perspective of the social planner. In this paper, we construct a Stackelberg game with a welfare-maximizing social planner and two profit-maximizing manufacturers producing NEVs and fuel vehicles (FVs), respectively. Interestingly, although both types of policies can increase the quantity of NEVs, demand subsidy also promotes the growth of total vehicles at the same time; in contrast, production regulation reduces the total vehicles. Moreover, compared with the benchmark that no policy intervention, demand subsidy generally improves social welfare, while production regulation improves social welfare only with high consumer preference for NEVs. Nevertheless, production regulation always has a positive impact on the environment, whereas demand subsidy may have a positive impact only when the NEV is very environment friendly. The numerical results show that consumer environmental preferences and the regulation of environmental impact determine which type of policy dominates the other.

MAKROEKONOMSKE DETERMINANTE PROIZVODNJE VINA U EUROPSKOJ UNIJI

This paper focuses on the determinants of wine production in the European wine industry. In the last two decades, the European wine industry has undergone many changes due to the entry of new countries into the world wine market. Although increasing competitiveness became the priority of the European Common Agricultural Policy, wine production and consumption in the EU have decreased in the last two decades, and therefore the aim of this research is to analyse and identify the macroeconomic determinants of wine production, i.e. what factors besides the price influence wine production in selected EU countries and in how they can be controlled. Empirical research was conducted using data for EU member states traditionally engaged in wine production. Panel data on wine production, wine consumption, average wine price, wine imports, wine exports and EU support to the wine sector were collected from secondary sources for 15 wine-producing EU countries and for the period 2009-2018. We estimated the econometric model using pooled OLS, as diagnostic tests indicated that this estimator was the best fit for our data. Our results suggest that domestic demand and domestic (EU) subsidies are the main drivers of wine production. To keep up with New World wine producers, even more emphasis should be placed on promoting the wine drinking culture.

The (still) mysterious case of agricultural protectionism

ABSTRACT Existing research demonstrates why farmers demand subsidies, but remains ambiguous as to why consumers/taxpayers support or rather do not oppose such subsidies. We approach this puzzle from two angles: how sensitive are citizens to cost implications of agricultural subsidies, and what is their “value function” with respect to agricultural policy? We argue that farm subsidies, besides benefiting farmers, promise to generate an array of non-market goods that serve various interests in society and thus receive strong support overall. To test our argument, we conducted conjoint survey experiments in two countries: Switzerland and the United States. Our results show that while cost implications only marginally reduce support for subsidies, support is positively affected by the allocation of subsidies to various policy goals, such as guaranteeing food security and enhancing animal welfare. These findings suggest that individual-level support for agricultural subsidies does not result from a lack of information, but reflect genuine appreciation of the perceived multi-functionality of agricultural subsidies.

Competition and Entry in Agricultural Markets: Experimental Evidence from Kenya

African agricultural markets are characterized by low farmer revenues and high consumer food prices. Many have worried that this wedge is partially driven by imperfect competition among intermediaries. This paper provides experimental evidence from Kenya on intermediary market structure. Randomized cost shocks and demand subsidies are used to identify a structural model of market competition. Estimates reveal that traders act consistently with joint profit maximization and earn median markups of 39 percent. Exogenously induced firm entry has negligible effects on prices, and low take-up of subsidized entry offers implies large fixed costs. We estimate that traders capture 82 percent of total surplus. (JEL L13, O13, Q11, Q12, Q13)

International Real Estate Review

Housing affordability for many Singaporean households has been declining since the 1990s. While eligible households are directly allocated new-built public housing at subsidized rates, these rates reflect price behavior in the laissez faire resale market and would be higher during periods of excess demand. We examine two policy initiatives since 2011 to improve housing affordability for targeted population segments. First, the government has stabilized the prices at which it sells new- built units by increasing supply-side producer discounts to moderate the extent to which new unit prices track the resale market. Second, demand subsidies are provided to low- and middle-income households to buy new subsidized housing. Price stabilization has prevented the transmission of demand shocks from the resale market to the new-built public housing sector but not improved affordability. However, successive calibrations of capital grants boosted the price to income ratio and debt servicing ratio indicators for households with incomes below the national median. These improvements are progressive, with the less well-off benefitting the most. Furthermore, the grants do not appear to induce housing overconsumption the way that demand subsidies are prone to do so and provide some assurance that the policies adopted in Singapore have not generated allocative inefficiencies.

Políticas de inclusión educativa en Chile: Tres nudos críticos

Habiendo logrado los desafíos de cobertura tras políticas de obligatoriedad y un sistema de financiamiento vía subvención a la demanda condicionada a la matrícula y asistencia, pero enfrentado al escenario de la segregación escolar, Chile ha decidido abrazar el sueño de una educación inclusiva y de calidad. En este artículo identificamos y analizamos tres nudos críticos que afectan las posibilidades de movilizarse hacia una educación inclusiva de calidad: a) una tensión entre la lógica de la integración e inclusión educativa, b) un modelo basado en el mercado que no considera los valores públicos, y c) una nueva arquitectura educacional, basada en la lógica de la rendición de cuentas individual, que coloca la posibilidad de mejoramiento educativo en sistemas de incentivos individuales atados al logro de pruebas de alto rendimiento. Discutimos la necesidad de abordar y destrabar estos nudos desde la investigación transdisciplinaria.

Economic dimension of the collapse of the ‘false cod’ Epinephelus aeneus in a context of ineffective management of the small-scale fisheries in Senegal

Small-scale fisheries are often seen as a solution for ensuring sustainability in marine exploitation. They are viewed as a suitable alternative to industrial fisheries, particularly when considering their social and economic importance in developing countries. Here, we show that the booming small-scale fishery sector in Senegal, in the context of increasing foreign demand, has induced the collapse of one of the most emblematic West African marine fish species, a large grouper Epinephelus aeneus, historically called ‘false cod’ by European fishers. The overexploitation of this species appears to be on account of the increasing effort sustained by a growing international demand and important subsidies, which resulted in a relative stability of the average economic yield per fishing trip and an incentive for continuing targeting this species to almost extinction. It is a critical time for addressing and mitigating the pressure of the small-scale fisheries to prevent declines of fish species that are highly valued by northern markets. A balance between conservation and exploitation is necessary to maintain ecological viability while considering the socio-economic importance of the small-scale fisheries. However, a new strategy is needed for conservation that will consider and articulate simultaneously the concerns regarding unmanaged and growing small-scale fisheries, rampant subsidies and increasing foreign demand.

Demand Subsidies Versus R&D: Comparing the Uncertain Impacts of Policy on a Pre-commercial Low-carbon Energy Technology

We combine an expert elicitation and a bottom-up manufacturing cost model to compare the effects of R&D and demand subsidies. We model their effects on the future costs of a low-carbon energy technology that is not currently commercially available, purely organic photovoltaics (PV). We find that: (1) successful R&D enables PV to achieve a cost target of 4c/kWh, (2) the cost of PV does not reach the target when only subsidies, and not R&D, are implemented, and (3) production-related effects on technological advance—learning-by-doing and economies of scale—are not as critical to the long-term potential for cost reduction in organic PV than is the investment in and success of R&D. These results are insensitive to two levels of policy intensity, the level of a carbon price, the availability of storage technology, and uncertainty in the main parameters used in the model. However, a case can still be made for subsidies: comparisons of stochastic dominance show that subsidies provide a hedge against failure in the R&D program.

Universal Health Insurance and the Effect of Cost Containment on Mortality Rates: Strokes and Heart Attacks in Japan

For more than four decades, Japan has offered universal health insurance. Despite the demand subsidy entailed, it has kept costs low by regulatorily capping the amounts it pays doctors, particularly for the most modern and sophisticated procedures. Facing subsidized demand but stringently capped prices on complex procedures, Japanese physicians have had little incentive to invest in specialized expertise. Instead, they have invested in small private clinics and hospitals. The resulting proliferation of primitive clinics and hospitals has cut both the number of complex modern medical procedures performed, and the number of hospitals with any substantial experience in those procedures. With a quarter of the heart disease in the United States, Japan performs less than 3 percent as many coronary bypass operations and less than 6 percent as many angioplasties. Of the 855 cities and regions in Japan, 77 percent lack any hospital with substantial experience in the sophisticated modern treatment (defined below) of cerebrovascular disease, and 89 percent lack much experience in angioplasties. In this article, I estimate one of the costs of this regulatorily‐driven lack of expertise. Toward that end, I combine mortality data from 855 cities with information on local hospital expertise and local demographic composition. In the typical city, I find that the addition of one hospital with substantial experience in modern stroke treatment would cut annual stroke mortality by 7 to 16 deaths. The addition of one hospital with substantial experience in angioplasties would cut the annual deaths from heart attacks in the city by over 19.

Demand Subsidies vs. R&D: Comparing the Uncertain Impacts of Policy on a Pre-Commercial Low-Carbon Energy Technology

We combined an expert elicitation and a bottom-up manufacturing cost model to compare the effects of R&D and demand subsidies. We modeled their effects on the future costs of a low-carbon energy technology that is not currently commercially available, purely organic photovoltaics (PV). We found that (1) successful R&D programs reduced costs more than did subsidies, (2) successful R&D enabled PV to achieve a cost target of 4c/kWh, and (3) the cost of PV did not reach the target when only subsidies, and not R&D, were implemented. These results are insensitive to two levels of policy intensity, the level of a carbon price, the availability of storage technology, and uncertainty in the main parameters used in the model. However, a case can still be made for subsidies: comparisons of stochastic dominance show that subsidies provide a hedge against failure in the R&D program.

The Mortality Effects of Cost Containment under Universal Health Insurance: The Japanese Experience

For over four decades, Japan has offered universal health insurance. Despite the demand subsidy entailed, it has kept costs low by regulatorily capping the amounts it pays doctors, particularly for the most modern and sophisticated procedures. Facing subsidized demand but stringently capped prices on the most complex procedures, Japanese physicians have had little incentive to invest in specialized expertise. Instead, they have invested in small private clinics and hospitals. The resulting proliferation of primitive clinics and hospitals has cut both the number of complex modern medical procedures performed, and the number of hospitals with any substantial experience in those procedures. With a quarter of the heart disease in the US, Japan performs less than 3 percent as many coronary bypass operations and less than 6 percent as many angioplasties. Of the 855 cities in Japan, 71 percent lack any hospital with substantial experience in the sophisticated modern treatment of cerebrovascular disease, and 83 percent lack any in heart disease. In this article, I estimate the mortality cost of this regulatorily-driven lack of expertise. Toward that end, I combine mortality data from 855 cities with information on local hospital expertise and local demographic composition. In the typical city, I find that the addition of one hospital with substantial experience in stroke patients or in modern stroke treatment would cut annual stroke mortality by 10 to 15 deaths. The addition of one hospital with substantial experience in cardiac bypass operations or angioplasties would cut annual heart attack mortality in the city by 27 to 56 deaths.

Childcare: An Investigation of Labour Market Issues

CAMPBELL J., SCOTT G. and THOMSON E. (2003) Childcare: an investigation of labour market issues, Reg. Studies 37, 957–967. Over recent years the UK government and the Scottish Executive have demonstrated a commitment to the development of childcare services through the use of both supply and demand subsidies. This paper reviews the rationale for the UK National Childcare Strategy and its Scottish equivalent, with a focus on the local development impact of each strategy. The findings of a recent survey of childcare provision in Glasgow are used to illustrate some of the key operational aspects of the Scottish childcare strategy. The survey paints a picture of a very diverse sector in terms of pay, employment stability and funding sources. This diversity is reinforced by the variety of public sector agencies involved in the promotion of childcare. The main conclusion is that despite the publication of the Childcare Strategies in 1998, there is a need for a more strategic approach if the objectives outlined in those documents are to be realised.CAMPBELL J., SCOTT G. et THOMSON E. (2003) Les structures d'accueil pour les enfants d'âge préscolaire: un examen des questions relatives au marché du travail,Reg. Studies 37, 957–967. Au cours des dernières années,le gouvernement britannique et le pouvoir exécutif en Ecosse se sont engagés à développer des structures d'accueil pour les enfants d'âge préscolaire par moyen des aides octroyées en fonction de la demande et de l'offre. Cet article cherche à faire la critique de la raison d'être de la statégie nationale en faveur du développement au Royaume-Uni des structures d'accueil pour les enfants d'âge préscolaire(UK National Childcare Strategy) et de la stratégie équivalente écossaise, et focalise les retombées de chacune des stratégies sur le plan local. On se sert des résultats provenant d'une enquête récente du développement des structures d'accueil pour les enfants d'âge préscolaire à Glasgow afin d'illustrer quelques-uns des aspects opérationnels clés de la stratégieécossaise en faveur de l'établissement des structures d'accueil pour les enfants d'âge préscolaire.L'enquête brosse un tableau d'un secteur divers en termes des salaires, de la stabilité de l'emploi et des ressources financières.Cette diversité se voit renforcée par la gamme des agences publiques qui s'occupent de la promotion des structures d'accueil pour les enfants d'âge préscolaire. La conclusion principale c'est la suivante. Malgré la publication des stratégies en faveur du développement des structures d'accueil pour les enfants d'âge préscolaire en1998, il faut une approche plus stratégique afin de réaliser les objectifs esquissés dans ces documents.CAMPBELL J., SCOTT G. und THOMSON E. (2003) Kinderfürsorge: eine Untersuchung von Arbeitsmarktproblemen,Reg. Studies 37, 957–967. In den letzten Jahren haben die britische Regierung und die schottische Exekutive sich für die Entwicklung der Kinderfürsorge mittels Subventionierung von Angebot und Nachfrage eingesetzt. Dieser Aufsatz bespricht die Gründe für die landesweite britische Strategie für Kinderfürsorge,sowie ihr schottisches Gegenstück, wobei sie besonders die Auswirkung beider Strategien auf die Entwicklung vor Ort unter die Lupe nimmt. Die Befunde einer kürzlich durchgeführten Untersuchung der in Glasgow geschaffenen Einrichtungen für Kinderfürsorge werden dazu benutzt, einige der einsatzfähigen Hauptaspekte der schottischen Kinderfürsorgestrategie zu beleuchten. Das Gutachten zeichnet ein Bild eines in Sachen Bezahlung, gleichbleibender Erwerbstätigkeit und Geldgeberquellen sehr unterschiedlichen Sektors.Diese Verschiedenartigkeit wird durch die Vielfalt der Agenturen desöffentlichen Sektors verstärkt, die sich mit Förderung der Kinderfürsorge beschäftigen. Die Hauptschlußfolgerung besteht darin, daß es trotz Veröffentlichung der Kinderfürsorgestrategien im Jahre 1998 eines strategisch verfeinerten Angehens bedarf, wenn die Ziele, die in jenen Papieren umrissen werden, auch durchgeführt werden sollen.

New approaches to progressive housing in Latin America: A key to habitat programs and policy

In advanced industrialized countries, ‘housing’ has become a product delivered complete to families by a sophisticated network of lenders, developers, title companies, and other organizations. In developing countries, 70% of housing investment occurs progressively—that is, households acquire land through purchase or invasion, and gradually improve the structure and legal tenure, and lobby for basic services. A useful approach for housing in this context: (a) offers a wider range of low-cost solutions, rather than just complete new units; (b) joins small loans at market rates (rather than long-term traditional mortgages), with family savings, and—sometimes—a small subsidy; and (c) has Government set the rules of the game and the private-sector directly produce and finance housing. The paper compares the “product” approach of industrialized countries with the progressive housing of developing countries, and profiles three types of program interventions that form an emerging housing practice in Latin America relevant to other developing regions: (a) housing microfinance; (b) low/moderate-income land development; and (c) direct demand subsidies.

Socio-economic Segregation in the Argentine Education System: School choice without vouchers

The main purpose of this paper is to review the Argentine case regarding school choice in view of the conclusions of recent research on socio-economic segregation in the educational system. In this context, the study of the Argentine educational system becomes a rather interesting one since Argentina has neither demand subsidy programs, nor voucher systems. On the contrary, the continuous actions by the State in matters of supply-oriented financing rule out any thoughts of a generalized existence of either educational markets or quasi-markets. Nevertheless, the strong regulating mechanisms imposed by the State seem to breed deregulated areas that promote actions by sectors with a greater economic or political capacity to satisfy their preferences in terms of their children's education.