Direct Subsidies Research Articles

Influence of Selected Agricultural Policy Instruments on the Regional Variation in Changes in Milk Production in Poland

Abstract Subject and purpose of work: The objectives of the elaboration are the following: 1) to analyze the regional changes (at the level of poviats) in the number of farms involved in milk production over the period 2002-2010; 2) to present the main factors affecting the ongoing changes in Polish farms oriented at milk production; 3) to determine the impact of the measure 121. “Modernization of agricultural holdings” under the RDP 2007-2013 and the applied system of direct subsidies for the development of farms oriented at milk production. Materials and methods: The work has been prepared on the basis of the analysis and synthesis of the source literature, statistical data collected and the author’s own reflections. Results: In Poland, in the years 2002-2010 there was a distinct regional differentiation in the pace of the ongoing changes in the dairy sector. The regions, where we observe the development of milk production, include almost the entire Podlaskie Province, the northern part of the Mazowieckie Province and the south-eastern part of the Warmińsko-Mazurskie Province. Conclusions: Within the RDP 2007-2013, significant funds were allocated to support the modernization of agricultural farms. Mainly under the measure 121 “Modernization of agricultural holdings” the investments were carried out in relation to the purchase of mobile equipment, they represented 89% of all investments. This was partly due to the actual demand and administrative procedures that stimulated these types of investments.

Optimal regulation of network expansion

AbstractWe model the regulation of irreversible capacity expansion by a firm with private information about capacity costs, where investments are financed from the firm's cash flows and demand is stochastic. The optimal mechanism is implemented by a revenue tax that increases with the price cap. If the asymmetric information has large support, then the optimal mechanism consists of a laissez‐faire regime for low‐cost firms. That is, the firm's price cap corresponds to that of an unregulated monopolist, and it is not taxed. This “maximal distortion at the top” is necessary to provide information rents, as direct subsidies are not feasible.

The Effect of China Industrial Policy on the Wage Gap between Enterprises: Empirical Evidence from Chinese Industrial Enterprises

The unbalanced development within the Chinese industries may bring the imbalance of income among different groups. What kind of role does industrial policy play, namely whether the implementation of China industrial policy brings the wage gap between enterprises? This paper considers subsidies as the breakthrough point, introduces industrial policy factor into a heterogeneous enterprise model, and theoretically decomposes the impact of industrial policy on enterprise wages into two mechanisms, namely subsidy transfer effect and competition effect. And it puts forward the following hypotheses: the enterprises spend part of policy subsidies on production, and now more wages paid are equivalent to direct fiscal subsidies; at the same time, enterprise wage level also depends on enterprise production efficiency, and industrial policy changes enterprise efficiency through promoting or inhibiting industrial competition, thereby having an indirect influence on enterprise wage level, namely competition effect. Next, this paper empirically checks above theoretical hypotheses by using the data of Chinese industrial enterprises above designated size from 1998 to 2007. Specifically, the control variables are gradually added, and the variable reflecting subsidy policy has always been a negative relationship with enterprise wage level. After controlling total factor productivity of enterprises, this relationship between subsidy policy and enterprise wage level becomes positive, while the impact of subsidies on total factor productivity of enterprises is negative. Then we can conclude that: negative competition effect resulting from China-style industrial policy through inhibiting enterprise efficiency exceeds positive subsidy transfer effect, finally leading to a reduction in enterprise wage level. This paper further explores the issue of a competition-friendly industrial policy based on Aghion et al.（2015）that shows the dispersion of government industrial policy coverage. Once industrial policy target is more extensive, the competitive effect of policy on enterprise wages will turn positive, and enterprise wage level will increase accordingly. These research conclusions help to understand the impact of industry policy on enterprise wages in the process of economic reform, enrich the related research of enterprise wages, and have enlightenment for deepening the reform: the unreasonable implementation of industrial policy has hindered the reform of basic wage system reform in China, and we can not bring some enterprises’ revenues to subsidize the other; the fairness of this behavior is questionable, and how to give priority to efficiency as well as equity needs to be weighed carefully and repeatedly by policy formulators. Subsidies for some enterprises can be converted into wage subsidies for skilled workers, which on the one hand, attract talents to enterprises and help enterprises to improve efficiency and on the other hand, avoid the negative effects resulting from direct subsidies for enterprises.

RELEVANCE THE REGULATION OF INNOVATION WITH THE CHALLENGES OF INFORMATION TECHNOLOGY AND COMPETITION

Intellectual property is directly connected with competition law. On the other side, it should be noted that innovation as a part of intellectual property rights make significant element of companies’ activities if they want to be competitive at the market. This is the reason why it is possible to say that competition law belongs to rules of economic relationships. Law is important for companies in sense to promote economic efficiency. The competitiveness is the ability of a region to export more in value added terms than it im­ports. That definition is very important for companies and for investors at the same time. Due to that, governments have to pay attention on all possible so-called discounts, includ­ing an artificially low currency, suppressed wages in export sectors, artificially low taxes on traded sector firms and direct subsidies to exports. Governments, but the legislators also should control barriers and obstacles, in order to improve measurements to eliminate them. It could be very important sign for investor. Finally, intellectual property rights will show their significance through the companies’ competition policy. The whole Europe develops research and development area, focusing on major competitors. Due to that task participants are interested especially in the share of private investment in a field of research.

An Artificial Neural Network Model to Analyze Maize Price Behavior in Mexico

Mexican producers were supported by the Government from 1993-2013 through the PROCAMPO (support program, direct subsidy from the federal government), in order to keep the prices stable. The tool used to analyze the basic products price behavior was Artificial Neural Network (ANN) models. Data from the period 1980 to 2014 was available, and two ANN models were implemented, one including only internal prices of related products and the second takes into account also the international maize price. The purpose of this paper was to analyze the impact of internal related products and international maize price on the behavior of internal maize price. Both models demonstrated the powerful of the ANN for prediction of the maize price 3 and 5 years ahead. Also, a sensitivity analysis was performed using Garson’s algorithm, through which was demonstrated that rice, safflower and sorghum are corn’s complementary products. The rice price was the variable with a major positive impact on the national corn price. On the other hand, wheat, soybean and barley behave as corn’s substitute products, with wheat price being the variable with major impact on the corn price. Including the international corn price improves the model performance, besides there was a negative sensitivity between the international and national corn price; this behavior is explained by the fact that during PROCAMPO existence, the national prices were forced to be stable while the international maize price was increasing. Finally, this study showed the application of the ANN models in a particular product price behavior, with the possibility of being used in the decision making process for the application of subsidies to the agricultural producers in public policies.

Labor-Income Distribution Structure of Farm Households and Their Evaluation on Grain Direct Subsidy in a Wheat Production Village of Shandong Province, China

Labor-Income Distribution Structure of Farm Households and Their Evaluation on Grain Direct Subsidy in a Wheat Production Village of Shandong Province, China

연구개발비 세액공제 효과에 관한 연구: 기업 재무적 관점을 중심으로 (R&D Tax Credit Analysis: Focusing on Financing)

Korean Abstract: 본 연구는 연구개발 세액공제제도를 기업의 외부자금조달 능력의 관점에서 분석한 보고서이다. 본 보고서는 기업의 외부자본조달 능력이 연구개발 세액공제의 효과에 미치는 영향을 이론 및 실증적으로 분석한다. 이론 분석에서는 기업의 합리적인 의사결정과정을 모형화하여 분석한다. 기본모형에서는 자기자본을 통한 자금조달의 경우를 살펴본다. 외부자본조달 비용이 존재하는 경우, 기업의 내부 현금창출 능력이 부족한 기업은 연구개발 세액공제율이 더 높다고 할지라도 연구개발을 더 늘리지 않는다. 완전모형에서는 부채를 추가하여 분석한다. 정해진 이자와 원금만 갚으면 되지만, 조달한도가 기업의 현금창출 능력에 따라 달라질 수 있는 부채자금조달의 특성을 분석에 활용한다. 분석 결과, 부채조달의 한도가 연구개발 세액공제효과에 영향을 줄 수 있는 것으로 나타난다. 실증연구에서는 2010년에 신설된 중견기업 세액공제구간을 활용하여, 상장 기업과 비상장 중견기업 간의 연구개발활동 변화를 비교한다. 상장 기업은 비상장 기업에 비해 외부자본을 더 용이하게 조달할 수 있다. 분석 결과, 2010년의 중견기업 세액공제구간 신설 전후로 상장 기업들이 비상장 기업들에 비해 연구개발활동을 더 많이 늘린 것을 확인할 수 있다. 본 연구의 시사점은 연구개발 세액공제의 효과를 증진시키기 위해서는 기업들이 자금을 용이하게 조달할 수 있도록 여건을 조성해 주어야 한다는 것이다. 다만, 기업에 직접 자금을 지원해주는 것은 도덕적 해이 등을 야기할 수 있으므로 지양하고, 그보다는 자본시장의 활성화를 통해 혁신적인 연구개발활동을 하는 기업에 자금이 잘 흘러갈 수 있도록 하는 것이 바람직하다. English Abstract: This paper studies R&D tax credit focusing on corporate external financing ability. It analyzes theoretically and empirically how external financing ability of a firm can affect the effects of R&D tax credit. I set up a q-theory type of model that analyzes a firm maximizing its value by choosing optimal R&D spending. The model shows that in case of costly external financing, firms could not increase their R&D as R&D tax credit rate gets high. Empirical evidence corroborates the argument. By taking advantage of introducing a new R&D tax credit bracket for medium size firms in 2009 Korea, I run diff-in-diff analysis. I show that listed firms, which have easy accessibility to external capital market, increased R&D more than non-listed firms after introducing the new tax credit bracket. This paper implies that reducing firms’ financing costs is crucial for improving the effects of R&D tax credit. Direct subsidy on R&D might not be desirable because moral hazard might arise. Easing on flow of capital to R&D active firms is appropriate by enhancing financial market.

Why do export subsidies still exist? R&D and output subsidies

To analyze why export subsidies still exist, we demonstrate the endogenous choice of strategic variable (R&D subsidy or output subsidy) in the third-market model in which exporting firms perform the R&D investment. We find that even though each government can improve welfare when it chooses R&D subsidy policy simultaneously, choosing output subsidy policy for both exporting governments is dominant strategy regardless of the degree of R&D spillover effect. This leads both governments to face prisoners' dilemma. Thus, even though the subsidies may cause trade disputes since direct subsidies are prohibited under WTO, our paper can provide the reason why some countries have incentives to use output subsidy policy rather than using R&D subsidy policy. On equilibrium path, it follows that social welfare under government non-intervention (e.g. free trade) is higher than under output subsidy. Furthermore, whether to reach the Pareto-superior cooperative R&D equilibrium, we provide some discussions.

Studies on forest landscape restoration in hilly and mountainous regions of Asia and Africa – an introduction to the Special Issue

The field of forest landscape restoration (FLR) is quickly gaining traction now that national commitments to restore degraded lands under the 2011 Bonn Challenge have reached upwards of 160 million ha. While the growing literature on FLR and associated methodologies being proposed emphasizes the importance of including stakeholders in decision making and implementation, local communities in hilly and mountainous regions often face particular challenges. The papers in this Special Issue of the International Forestry Review shed light on some of the approaches incorporated in FLR design and its outcomes in cases from China, Ethiopia, India, Nepal, Thailand, and Vietnam. These include direct subsidies or PES, land distributions and devolution of resource rights, engagement of communities in participatory management, and other approaches. Taken together, the studies in this Special Issue bring together a range of insights into the diversity of approaches favoring the implementation of FLR, particularly in sloping landscapes, under varying social and ecological conditions.

Causes of energy poverty in a cold and resource-rich country: evidence from Kazakhstan

ABSTRACTKazakhstan is an upper-middle-income country and one of the coldest countries in the world with rich energy resources and energy prices considerably lower than in developed countries. This paper presents the first comprehensive overview of household fuel use in Kazakhstan and assesses the causes and extent of energy poverty using the Households Living Conditions Survey dataset of 12,000 households. The results show that there is an overwhelming reliance on coal in Kazakhstan: 40% of all surveyed households use coal for heating, cooking and other needs. In general, liquefied petroleum gas is mainly used for cooking, coal and firewood for heating, while electricity is rarely used for heating. Energy poverty was less prevalent in oil and gas rich regions, due to low gas prices and higher income levels in those regions, while households located in the North Kazakhstan, Central and East Kazakhstan mainly suffer from lack of cleaner fuel options, income poverty, longer and colder winters and consequently energy affordability. Despite low energy prices in Kazakhstan, the results demonstrate that 28% of surveyed households spend more than 10% of their income on energy. Gas and district heating infrastructure coverage and income inequality across its regions contributed the most to energy poverty in Kazakhstan. Energy prices are regulated and indirectly subsidised. Removing energy subsidies alone may worsen energy affordability of households. Offering direct subsidies to cover part of the energy expenditures may not fully solve the problem, but subsidies, interventions for efficient technologies and fuels, dwelling energy-efficiency improvements are necessary.

Market and Welfare Impacts of Agri-Environmental Policy Options in the Malaysian Rice Sector

The use of agrochemicals including pesticides and chemical-based fertilisers in the Malaysian rice sector is stimulated through substantial direct subsidies. In light of the pursuit of environmentally friendly rice production practices, the government may consider reducing the use of these inputs. In doing so, a number of policy options, including subsidy reductions and reducing dependence on chemicals and pesticides and to move towards more natural and environmental friendly inputs are considered. This study employs a partial equilibrium model with explicit welfare functions and linkages to the Rest of the World (ROW) to address the impacts of government policies on the use of agrochemicals, food security and welfare. Results suggest that a 10 percent reduction in agrochemical subsidies considerably reduces the use of agrochemicals; however, it significantly decreases national welfare and weakens food security. Further simulation denotes a reduction of 10 percent of demand for agrochemicals has com-parable impacts to that of a 10 percent reduction in agrochemical subsidies except that it increases the nation’s welfare. Overall results imply that encouraging the use of organic inputs might have a more desirable impact on the variables of interest relative to reducing agrochemicals either through subsidy reduction or input restriction.

Joint production, land allocation, and the effects of the production flexibility program

An empirical land allocation model is developed and fit to production data of the top five crops in the USA and to crop output prices adjusted for direct payments and subsidies. The land allocation model based on the theory of the multiproduct firm allows for jointness in production, and it is extended to handle non-allocable inputs. Specifically, the model is used to analyze whether the Food Security Act of 1985, known as the 1985 Farm Bill, increased flexibility in land allocation decisions by comparing responsiveness of land allocation among the crops, before and after the passage of the 1885 Farm Bill, to changes in total land availability and changes in crop output prices. The results confirm that a structural change in land allocation dynamics took place after the passage of the 1985 Farm Bill. We show that more crops (wheat and soybeans, in particular) become more acreage responsive to the changes in total land available for production after 1985. For example, the results indicate that competition for acreage between corn and wheat is associated with the implementation of the 1985 Farm Bill. The results provide evidence that the onset of the increased acreage allocation flexibility by farmers originated in the policies of the 1985 Farm Bill. The study also demonstrates that a policy targeting a particular crop will inadvertently affect production of other crops. This study quantifies these indirect effects on the five major crops grown in the USA.

Using locally produced photovoltaic energy to charge electric vehicles

Mobility in Switzerland currently consumes about 35% of the total energy demand. While internal combustion engines still generate most of it, the increasing number of electric vehicles changes the landscape by decoupling energy production from consumption. This allows using more sustainable energy sources, such as photovoltaics (PV), hydroelectric power plants or wind turbines. In the past years, the number of PV installations has grown rapidly in Switzerland. It is expected that PV has the highest growth potential of all renewable energy sources. Solar panels are especially interesting, as they can be installed on most buildings, which distributes the electricity production. However, due to frequent fluctuations in production, PV poses a challenge for the existing power grid. It is unclear to what extent PV production can be increased without the need for extensions of the power grid, such as additional transmission lines or storage capabilities. Electric vehicles could be used to consume fluctuating electricity production. In this paper, we study the effects of using locally produced photovoltaic power to recharge electric vehicles of commuters in individual Swiss municipalities. Such an analysis not only gives us indications of the potentials and limits of using photovoltaics to satisfy mobility energy demands, but can also be used to better direct subsidies and plan the electrical grid.

Farmer rationality and the adoption of greening practices in Poland

Common Agricultural Policy (CAP) reform in the European Union introduced a new element: greening. The aim of greening is to support the environment and create non-productive value in agriculture. The main element of greening is the Ecological Focus Area (EFA) meaning that a portion of farmland area has to be designed for environmental purposes. This article consists of an evaluatation of greening and its elements in the first year CAP reform has come into force. Surveys were used as a tool to gather information about farm characteristics, ways to meet greening requirements as well as the opinions of farmers as to changes in direct subsidies and greening obligations. The research was conducted in 2015 directly interviewing 290 farmers from the whole of Poland. The farmers interviewed lived in different parts of the country and had different size farms. Data was prepared with the use of spreadsheets and were analysed using the R statistical program and the “gmodel” and “vcd” statistical packages were used during the calculations. Polish farmers are against greening. Greening does not significantly change the way farmers run their farms. They choose the cheapest options of EFA which are usually not the best for the environment. Furthermore, farmers have to bear the cost of introducing the new elements themselves. Despite a high number of environmental and agricultural advantages offered by new farming methods, crop rotation and after-crop sowing duty, CAP reform is assessed in a negative light. As a result of negative opinions held by farmers due to the lack of subsidies, farmers may not continue greening practices in the future.

Characterizing and Analyzing Sonor System in South Sumatra Tidal Wetlands

The research aimed to (1) describe changing biomass during the burning process, (2) characterize the nutrient loss due to biomass burning, (3) analyse the financial loss of nutrient transfer, and (4) compare farmer’s income among three land typologies. This research was conducted in tidal wetlands Talang Sepucuk, OKI District, South Sumatra with a slope of 0-3 %. Three selected land typologies (B, C and D) are located in the area adjacent to one another with distance < 1.200 m. The natural vegetation data and paddy yields was recorded by squares method, i.e. 25 x 25 m at each study site, dried and weighed and analyzed in the laboratory. The research resulted that the nutrient transfer due to biomass burning was in range of Rp 49.98-51.62 Mills/ha/year. The farmer’s income of the sonor system was very small (Rp 3.61-3.97 Mills/ha/year), it was only about 7 % of the total financial loss of nutrient transfer). The remaining value (93 %) is beyond the capacity of farmers to harvest natural resources. This value (93 %) is classified as one of the biggest negative impact of the sonor system to be paid by the all people.<strong> </strong>The government must intervene to make the public policy by giving direct subsidy to farmers NOT to burn biomass in the sonor system with compensation of at least 2 (two) times of farmer’s income from the sonor system (around Rp 7.66 Mill. Rp/ha/year). If farmers still continue to apply the sonor system by using fire, then there is very little opportunity for us to manage the nutrients loss due to biomass burning. The preventive and proactive approach is the best way how to manage the land resources.

Patent Nationally, Innovate Locally

Innovation – doing things that are new and in some way better than what existed before – produces new information that benefits others across geographic regions. But innovation is also an intensely local activity that produces economic benefits for the region in which innovators work and reside. This unique attribute of innovation deeply influences how government supports innovation in the United States. At a descriptive level, the federal government vigorously protects intellectual property rights in new inventions and original expression, but directly funds research only in a few circumstances—primarily national defense. In contrast, subnational governments like states and cities do not grant intellectual property rights, but perform a similar function using innovation finance: direct subsidies for innovation paid from general tax revenues. This asymmetry can be explained and justified by the principle that public goods should be supplied by the smallest unit of governance that internalizes the benefits. States cannot internalize the benefits of innovation using patents and copyrights, but they can draw on public money to capture the geographically localized benefits that result from the agglomeration economies that grow up around knowledge exchange (called “innovation clusters”). This justifies federal patents and copyrights and federal funding for research of high national relevance, but not federal funding for the majority of private sector innovation. This conclusion casts doubt on proposals to use federal funds to directly finance innovation in lieu of IP. But it also casts doubt on the argument that government must rely exclusively on IP because it cannot effectively use public money to promote innovation. Instead, the American innovation system is bifurcated: the federal government protects exclusive rights in information that “spills over” state lines; state and local governments finance the practical development of innovations within their particular geographic communities. Fellow at the Center for Technology, Innovation & Competition (CTIC) at Penn Law and Visiting Fellow at the Yale Law School Information Society Project (ISP).

Stabilność finansowa instytucji kultury na przykładzie wojewódzkich teatrów i instytucji muzycznych

Cultural institutions are organizations whose scope of core business comprises activities in the area of broadly understood culture. The aim of this article is to evaluate the financial stability of voivodeship cultural institutions, like theaters and music institutions, in the light of direct subsidies to those institutions from organizers. The hypothesis is that subsidized cultural institutions in Poland have a stable financial situation. Due to the fact that revenues and operational costs are unbalanced, it is actually the subsidy that should let those institutions continue operational activity in a stable environment with independence in operational and financial decisions. In the context of the financial stability definition adopted in this article, the observation is that the level of subsidies for voivodeship cultural institutions does not guarantee the completion of statutory tasks in all examined institutions.

Global Kerosene Subsidies: An Obstacle to Energy Efficiency and Development

Summary It is widely agreed that energy subsidies impede the efficient functioning of markets. The resulting distortions in prices work at odds with policies to improve energy efficiency and reduce the cost of energy services and associated externalities such as health and environmental damages. The analysis developed in this article finds that kerosene is used in 173 countries, at a cost to consumers of $43.4B/y, $60.3B/y including direct economic subsidies, and $77.2B/y including certain externalities. Despite low world oil prices, direct economic subsidies for kerosene were $18.4B in 2013, and $34.7B including environmental externalities. These values correspond to 72% and 56% of total kerosene costs being passed through to consumers, respectively. When excluding advanced economies, the pass-through values fall to 40% and 35%. Approximately 52% of the global kerosene supply receives direct subsidy, or 63% when externality costs are considered. The cooking end use receives $2.0B/y in direct kerosene subsidies, lighting $7.1B/y, and heating and other residual uses $9.3B/y, or $76 per over all households each year. Defining subsidies at this level of granularity is useful for pinpointing policy issues and opportunities. Promoting a transition to energy efficient off-grid energy services is one of the most cost-effective ways of reducing dependency on subsidies. However, the very presence of subsidies undercuts this process by diluting market price signals and rendering energy efficiency investments less cost-effective, while competing with other social and development-focused budgetary needs. Kerosene subsidies are additionally counterproductive because the emerging technologies they impede (e.g., improved lighting and cook stoves) also improve productivity, safety, and quality of life. Forty-five countries—many in the developing world—have priced kerosene such that there are no direct subsidies, and twenty-two have done so even when accounting for environmental externalities, suggesting the practice is economically and politically feasible.

The Role of Nonprofits in Meeting the Housing Challenge in the United States

Housing owned by nonprofit housing organizations comprises one of the two components of the U.S.’s social housing sector, the other being public housing. After providing relevant background about affordable rental housing programs in the United States (including federal, state, and local strategies); the overall size of the U.S. social housing sector; and the level of direct and indirect subsidies for housing, the article focuses on the key challenges facing the nonprofit housing sector. Details also are provided about the difficulties involved in navigating the Low Income Housing Tax Credit program for both nonprofit and for-profit developers. The final section offers suggestions for how nonprofits could be better supported through a series of ‘nonprofit-centric’ public policies and programs. Despite the ongoing need for more federal involvement in affordable housing, and the important role that nonprofit housing organizations are able to play, the current political situation in the United States means that an expanded federally supported affordable housing agenda is highly unlikely in the foreseeable future.

Social Economic Change as a Precondition of Ethnic Conflicts: The Cases of Osh Conflicts in 1990 and 2010

This article demonstrates that ethnicity itself didn’t play a significant role to cause conflicts in Osh in 1990 and 2010, but was rather a side effect or a catalyst produced inevitably by political struggle in the country. The Osh conflict in 1990 occurred at the weakening of the USSR's institutional control and decreasing material support from the center. Kyrgyzstan being the major recipient of both indirect and direct subsidies from the USSR suffered a severe economic depression because subsidies were cut or substantially reduced. Moreover, the sudden disintegration of production and trade relations further exacerbated the economic situation in Kyrgyzstan. The economic decline caused a demographic imbalance, which has contributed to increased confrontation between Kyrgyz and ethnic Uzbeks in Osh. These social tensions coincided with political mobilization under the slogans of ethnicity and contributed to the intensification of the conflict making it look similar to an ethnic conflict for an outside observer. Similarly, the Osh conflict in 2010 happened in the declining economy which was not only the result of the global economic crisis and difficulties in relations with Russia. The political short-sightedness of the Bakiyev regime in resolving problems with the air base at Manas led to complication of relations with Russia, which subsequently led to economic decline in Kyrgyzstan. The economic difficulties soon translated into institutional instability. Massive public demonstrations “framed” as an ethnic conflict by political elites intensified the battle, adding to it an “ethnic” dimension.