Investment Subsidies Research Articles

A bootstrap procedure to estimate the causal effect of a public policy, considering overlap and imperfect compliance

This paper introduces a nonparametric bootstrap method for estimating the causal effects of public policy under the circumstances of imperfect compliance and overlap. It focuses on business investment subsidies in Sardinia by comparing firms eligible for the 1999 subsidies to those not, amid issues of imperfect compliance and overlapping programs. Bootstrap confidence intervals (CI) are proposed for the average effect of treatment on the sub-population of compliers. The obtained CIs are consistent across nominal levels and robust against data nonnormality; they show coverages of credible intervals close to nominal, suggesting effectiveness for assessing causal effects. Compared to other methods, the results of the new combination of a specific estimator for incompliance and the bootstrap align with those of more modern approaches such as Bayesian Additive Regression Trees and Causal forest.

The Influence of Firm Characteristics and Macroeconomic Factors on Financial Performance: Evidence from the Portuguese Hotel Industry

This study examines the determinants of the financial performance of the Portuguese hotel industry. Despite the economic relevance of the hotel industry and financial performance as an indicator of business survival, academic research on the factors that influence it in the context of this industry, particularly in Portugal, is not extensive. This study encompassed a sample of 738 hotel companies from 2016 to 2021, using data from the Orbis database. This research was based on the assumption that a company’s size, liquidity, the tangibility of its assets, and debt level influence financial performance in the hotel industry, as well as the assumption that gross domestic product and consumer sentiment also affect the business success of hotel companies. By applying a panel data methodology, the findings indicate that all variables showed significant influence on financial performance, except liquidity. The analysis also reveals that smaller companies were more negatively affected by the demand decline induced by the COVID-19 pandemic. To improve the financial performance of the Portuguese hotel industry, the findings suggest that policymakers must work towards ensuring diversified sources of financing for the hotel business, such as investment subsidies, so that companies can minimize debt, especially during periods of slow economic growth. Additionally, companies must promote management strategies that enhance self-financing. Both measures could help companies increase their size, taking advantage of good business opportunities to explore economies of scale.

An Exploration of Entrepreneurs’ Socio-economic Situation and Its Impact on Micro and Small Businesses in South Andaman

This study aims to investigate the socio-economic conditions of entrepreneurs that influence the growth of micro and small enterprises (MSEs) in the South Andaman District. In this study, a scheduled questionnaire-based survey research design was used, and a sample of 344 small business owners was collected for analysis. The data were processed using SPSS, and chi-squared test was applied for statistical analysis. The study’s findings revealed that factors such as entrepreneurs’ business experience, income levels, the number of working employees and ownership of house property significantly impact the growth of enterprises in the island region. However, factors like business location and sector of enterprises were found to be statistically insignificant in determining MSEs’ growth in the island region. The study suggests that policymakers and local administrations should enhance support for micro, small and medium-sized enterprises in island regions by implementing policies such as island capital investment subsidies and island transport subsidies for MSEs. As a result, small businesses play a pivotal role by contributing to local employment, production and investment opportunities in the island region.

Decision making and benefit analysis of closed-loop remanufacturing supply chain considering government subsidies

Remanufacturing closed-loop supply chain can effectively deal with the deterioration of environmental resources and the limited supply of resources as a part of circular economy. Government subsidies are an important factor to promote its development. In this paper, we consider a two-stage remanufacturing closed-loop supply chain, where the retailer is responsible for recycling, and the manufacturer will innovate in remanufacturing technology based on the extended producer responsibility system. The study constructs a Stackelberg game model with the manufacturer as a leader, and compares the different impacts of the two subsidy strategies on supply chain decisions (i.e., subsidies for investment in remanufacturing technology innovation and subsidies for the cost of remanufactured products). Numerical analyses are conducted to visualize the effects of subsidies on the decision-making of closed-loop supply chain members, environmental benefits, and social welfare. The findings indicate that when the level of subsidy is low, government subsidies for investment in remanufacturing technology innovation can accelerate the upgrading of remanufacturing technology, leading to higher environmental benefits and social welfare compared to subsidising the cost of remanufactured products. The results show that when the level of subsidy is high, government subsidies for remanufactured product costs, while yielding greater environmental benefits and social welfare compared to subsidies for investment in remanufacturing technology innovation, have a lesser impact on the advancement of remanufacturing technology.

Addressing the reliability challenge: Subsidy policies for promoting renewable electricity consumption

The intermittency and volatility of renewable electricity pose challenges to supply reliability, which is not conducive to renewable energy consumption. To ensure a reliable electricity supply, more governments implement subsidy policies to promote the adoption of innovative technologies by renewable energy producers to enhance supply reliability. We compare two types of subsidies provided by a government: investment subsidy (IS) policy, which is implemented in the deployment stage to directly reduce improvement costs, and operational subsidy (OS) policy, which is implemented in the operational stage to increase the renewable energy producer’s marginal returns. First, we show that without government intervention, customers’ low green consciousness or higher improvement costs may prevent the renewable energy producer from enhancing supply reliability. Second, through a comprehensive comparison, we find that both subsidy policies can incentivize the renewable energy producer to improve supply reliability when customers are more green-conscious, and the improvement cost is high. However, the OS policy and the IS policy operate on different mechanisms: the IS policy can directly alleviate the improvement cost burden on the renewable energy producer, while the OS policy serves a dual role of increasing the renewable energy producer’s marginal operational profit and expanding the market demand for renewable electricity. When customers’ green consciousness is low, the government can only choose whether or not to implement the OS policy. Finally, we highlight that the implementation of the IS policy by the government may not be more beneficial to both the renewable energy producer and customers compared to the OS policy. This result informs regulators that energy security should be considered when designing subsidy policies and should not be limited to promoting the interests of participants.

A real options-based framework for multi-generation liquid air energy storage investment decision under multiple uncertainties and policy incentives

Liquid Air Energy Storage (LAES) is a promising energy storage technology renowned for its advantages such as geographical flexibility and high energy density. Comprehensively assessing LAES investment value and timing remains challenging due to uncertainties in technology costs and market conditions. This study introduces a real options-based framework to evaluate investments in multi-generation LAES systems in China's power market by considering uncertain factors, such as investment cost and electricity price. Additionally, the impact of various incentives, including subsidies and preferential taxation policies, on LAES investment is investigated. The proposed investment decision framework is applied in a case study of a 10 MW-class multi-generation LAES system. Results show that the current economic environment is insufficient to trigger immediate LAES investment. The recommended optimal investment times are 2029 for Guangdong, 2031 for Jiangsu, and 2036 for Beijing and Qinghai without incentives. The levelized cost of storage at the optimal investment time is 0.105-0.174$/kWhe, and the optimal investment value is 882-9269k$. It is also found that preferential taxation policies can increase the LAES investment value. Increasing investment subsidies and technology learning effects have limited impacts on stimulating investments. In contrast, discharge subsidies are more favorable for promoting the deployment of LAES systems.

Education choice and human capital accumulation with an endogenous fertility model

This paper, after presenting development of an endogenous fertility model with endogenous education investment, examines determination of the shares of households which select public education, income growth, income inequality, and fertility. Results demonstrate that a child allowance raises the share of households selecting public education. Furthermore, an increase in a subsidy for private education investment is not always sufficient to raise aggregate human capital accumulation, even if the share of households selecting private education is large. Furthermore, this paper presents an examination of how government spending on subsidy policies is determined as a result of a voting system. Numerical examples verify the result obtained using the theoretical model.

Competing buyers’ investment and ordering strategies under supply disruption

Supply chain disruptions can be costly and disruptive, and reducing supplier uncertainty through investments can be an effective strategy for mitigating these risks. In this study, we explore ordering and investment strategies in a downstream competitive environment, considering supply uncertainty. We consider two buyers ordering from a single supplier and competing in a Cournot market. Buyers must balance investment benefits against costs when making investment decisions. We find that without downstream competition, a relatively low investment proportion can yield a “win-win” outcome. Under downstream competition, an increased number of investors does not necessarily lead to higher supplier reliability. When both buyers invest at a high ratio, the significant decline in order quantities may results in lower supplier reliability. When there is only one investing buyer in the market, even though the competitor may benefit from spillover reliability enhancement — free-riding, the buyer may also be willing to provide an investment subsidy to improve the supplier’s reliability. When both buyers invest at a moderate ratio, downstream competition may benefit all supply chain members. Moreover, increasing wholesale price differentiation and endogenous investment ratios can effectively reduce free-riding behavior of the non-investing buyer. These findings have practical implications for supply chain managers aiming to reduce supply risks and allocate investment resources efficiently.

Project performance factors in the domestic business support system in Kazakhstan: An empirical study

The relevance of the study is due to the importance of assessing projects implemented within the framework of the state business support system, in which entrepreneurs take an active part by submitting applications for various types of support, including investment subsidies, technical assistance in the implementation of quality management systems, export support, and educational programs. The study identified the main factors determining the successful implementation of projects aimed at supporting and stimulating business development. The research design of project implementation effectiveness factors in the business support system is a strategic approach that allows you to organize and structure the analysis of theoretical concepts, and also provides a basis for subsequent experimental research in a real practical project management environment. The research methodology includes the use of structural modeling, which is a validated technique for testing multiple parallel hypotheses about the existence of cause-and-effect relationships. The conducted survey of business entities in several regions of Kazakhstan and the subsequent data analysis confirmed the significance of the identified factors, as a result of which the identified analysis allows to better understand the processes occurring in the business support system and offer practical recommendations for its improvement, which can also serve as a basis for the development of more effective strategies and programs to support entrepreneurship in Kazakhstan.

Financing green entrepreneurs under limited commitment

Risk-averse entrepreneurs interact with financiers to fund their projects. Projects can be operated under green or dirty technologies. We explore the role of limited commitment in determining the adoption of green technologies when governments enact carbon taxes and/or directed investment subsidies. We show that entrepreneurial (respectively, financier) limited commitment makes it more (less) costly for governments to encourage green technology adoption. Because green technologies are still at an early stage, the cash flows they generate are back-loaded. Entrepreneurial limited commitment forces consumption to increase over time, thereby undermining risk-sharing and making dirty technologies more attractive. By contrast, under financier limited commitment, the possibility that front-loaded dirty technologies become obsolete forces consumption to decrease over time, thereby impairing risk-sharing and making green technologies more attractive. We also show that carbon taxes (directed technology subsidies) are more cost-effective when entrepreneurs (financiers) display limited commitment.

Impact of tax policy on the development of agrarian enterprises and organisations

The purpose of this study was to analyse the role of tax policy in the agricultural sector to determine its impact on innovative development, investment decisions, and competitiveness of enterprises in this area. The study performed a comparative analysis of various aspects of tax regulation, review of taxation instruments, consideration of special tax regimes in such countries as the USA, Germany, France, Spain, Poland, and Kyrgyzstan. The study investigated various aspects of tax regulation that have direct and indirect impact on the functioning of the agricultural sector. The role of tax policy in stimulating investment and development in agriculture by providing tax incentives and subsidies for investment in innovative technologies, process mechanisation, and research was examined. Special tax regimes aimed at supporting agricultural enterprises were analysed, and examples of tax policies in different countries, including the USA, the European Union, China, India, and Kyrgyzstan, were provided. The state of agricultural development in Kyrgyzstan was reviewed, and the main challenges, government support measures, and the main land tax rates across the country were identified. The key point was to develop recommendations for improving the tax system to stimulate agricultural development derived from the synthesis method. This involves the introduction of tax exemptions and investment incentives, differentiation of tax rates depending on segments and regions of agriculture, stakeholder consultations, simplification of tax administration, and attraction of foreign investment through special tax regimes. Concrete examples were also given of large agricultural enterprises in different countries where improved tax policies can contribute to the development and efficiency of their operations

Wells or Welfare? Macroeconomic implications of the Canadian oil subsidy

The study constructs a general equilibrium model to investigate the macroeconomic effects of oil production and investment subsidies. To make the model reflect real-life situations, the study incorporates Canadian economic data and uses a Bayesian method to fine-tune the model. Although subsidies boost the short-term economic effects of oil price shocks, they lead to overall losses in economic welfare over time, regardless of the channel through which they are provided. The study shows that a less aggressive headline inflation-targeting monetary policy combined with an efficient tax system is more beneficial in terms of welfare maximisation. The findings suggest three essential and complementary policies: a gradual phase-out of oil subsidies, starting with investment subsidies due to their relatively high welfare cost; increased investment in the green energy sector to reduce carbon footprints and offset the decline in oil and gas sectors; and improved coordination between fiscal and monetary policies.

Vision of Offshore Energy Hub at Faroe Islands: The Market Equilibrium Impact

This study examines the integration of an offshore wind farm and green hydrogen production as a strategy to enhance the Faroe Islands' energy independence and reduce its carbon footprint. Utilizing the EnergyPLAN tool and market economic simulations, including Levelized Cost of Hydrogen and Net Present Value calculations, the research evaluates the economic viability and environmental impact of transitioning to renewable energy sources by 2030. The analysis explores various scenarios, ranging from dedicated offshore wind for in-turbine hydrogen production to platform-based electricity and hydrogen distribution. Results indicate that integrating offshore wind with green hydrogen production can significantly reduce CO2 emissions and dependency on imported fossil fuels. However, financial viability hinges on supportive mechanisms such as investment subsidies. The study's findings suggest that achieving economic feasibility requires strategic policy frameworks. This research contributes to the discourse on sustainable energy planning by offering insights into the dynamics of system integration, market economic simulations, and the role of support mechanisms in facilitating the green transition.

The evolutionary analysis of investment in CCS-EOR under dual carbon target—From the perspective of multi-agent involvement

Carbon capture and storage with enhanced oil recovery (CCS-EOR) technology plays a crucial role in achieving dual carbon targets in China. And the rapid diffusion of technology requires collaboration among various stakeholders involved in industrial chain of CCS-EOR project and then it will cause conflict of interest among the participants. In order to solve the problem existing in CCS-EOR promotion and propel the rapid deployment of low-carbon technology in China, the paper constructs a tripartite evolutionary game model by incorporating the strategic choices of coal-fired power plants, oilfield enterprises and governments into the framework, explores the respective dynamic evolutionary path of three parties and analyzes the impact of each parameter change on the system evolution results Through the numerical simulation, the paper identifies the optimal evolutionary path to spur the application of CCS-EOR and determine their strategy choices of three involved subjects in the game framework. Based on the sensitivity analysis, results are given as follows: (1) The government's clean electricity subsidy and carbon utilization subsidy have pushed the timing of CCS retrofitting significantly forward, but the initial investment subsidy has little impact on it; (2) Under the cooperation mode of coal-fired power plants and oilfield enterprises, the optimal cost-sharing ratio of the initial investment for coal-fired power plants is about 0.4 to promote both sides to reach cooperation faster. Once it exceeds 0.4, the probability of cooperation between them will be significantly reduced; (3) The carbon tax policy effectively propels the development of CCS-EOR technology. When the carbon tax rises from 30 CNY/t to 120CNY/t, power plants will conduct CCS retrofitting investment two years in advance.

Investment benefit analysis of coal-to-hydrogen coupled CCS technology in China based on real option approach

As a zero-carbon energy, hydrogen energy is widey recognized as playing an important role in reducing carbon emissions and addressing climate change. Considering the resource and industrial conditions in China, the coal-to-hydrogen coupled with carbon capture and storage (CTHCCS) may be a necessary choice in the early stage of low-carbon hydrogen energy development. This study used real option models to analyze the investment benefits of the representative CTHCCS technology at the national and regional levels in the current and future development scenarios in China, and discusses the impact of uncertainties in carbon price, technological progress, and policy incentives on the CTHCCS investment. The results show that (1) The opportunity for immediate investment in the CTHCCS is not available in China unless the cost of carbon capture and storage (CCS) technology decreases and the carbon price increases significantly. (2) The current CTHCCS investment critical carbon price is 353.3 RMB/t, which will decrease by 45.0%, 73.9% and 57.3% when using the initial investment subsidy, carbon emission reduction subsidy and clean fuel subsidy, respectively. (3) The CTHCCS presents a relatively high investment benefit in Xinjiang, Inner Mongolia, and Shaanxi, highlighting that these areas are key pioneers for “blue hydrogen” production in China.

Sustainability of Public Debt, Investment Subsidies, and Endogenous Growth With Heterogeneous Firms and Financial Frictions

Sustainability of Public Debt, Investment Subsidies, and Endogenous Growth With Heterogeneous Firms and Financial Frictions

Green technology outsourcing for agricultural supply chains with government subsidies

To promote green agricultural production, the government often provides two types of subsidies: the Green Technology Operation Subsidy (GOS), and the Green Technology Investment Subsidy (GIS). This paper examines the impact of government subsidy policies on a two-tier agricultural supply chain in which the farmer can choose to self-invest in green technologies or outsource them to the service provider. Our results indicate that outsourcing is more conducive to higher green technology inputs than self-directed investment in most cases and can generate higher profits for small-scale farmers; however, as the land scale increases, farmers prefer to invest in green technologies by themselves. In addition, if the farmer decides to self-invest in green technologies, the farmer prefer the GIS (GOS) policy when the land scale is small (large). Further analysis shows that if the farmer decides to outsource green technologies, the farmer’s profit under the two subsidy policies is equal when the land scale is small, while the farmer benefits more from the GOS policy when the land scale is large. Finally, from the perspective of promoting agricultural green production, the GIS policy is always better than the GOS policy, regardless of whether the farmer outsource green technologies.

A monetary business-cycle model with an augmented cash-inadvance constraint, investment tax credit and a government sector: the case of Bulgaria (1999-2022)


 
 
 We modify an otherwise standard business cycle model with a richer government sector, and add an augmented cash-in-advance (CIA) considerations. In particular, the cash in advance constraint of Cole (2020) is extended to include private investment and government consumption, and allows a proportion of total expenditure to be done using credit. Additionally, we allow for the presence of an investment subsidy (“investment tax credit”). This specification is then calibrated to Bulgarian data after the introduction of the currency board (1999-2022), gives a role to money in accentuating economic fluctuations. In particular, the modified CIA constraint pro- duces a mechanism that allows the framework to reproduce better observed variability and correlations among model variables, and those characterizing the labor market in particular.
 
 

Towards a more integrated approach of housing and care for persons with a disability in Flanders

Aiming to offer persons with disabilities more opportunities to live independently and more inclusive, the Flemish government radically revised its subsidies for care and care infrastructure for persons with disabilities. Since 2016, subsidies for care are no longer allocated to care providers, but directly to the person with disabilities. In 2018, brick-and-mortar subsidies for care infrastructure were replaced with subject-specific investment subsidies. In this oral paper, we present the results of a study carried out in 2019 aiming to evaluate the impact of this more demand-driven subsidisation on the housing situation of persons with a disability.
 The evaluation was carried out by academic researchers, but set up in co-design with the Housing Agency Flanders, the Flemish Department responsible for care, care organisations, social housing providers, municipalities and organisations supporting persons with a disability. Persons with a disability receiving a care budget were invited to respond to a survey about their living conditions and how these changed after receiving the care budget. Another survey was send to care organisations and social housing providers and contained questions on the impact of the policy change on their investment decisions. After analysing the data, discussions with stakeholders were held to deepen the understanding of the results.
 Persons with disabilities reported in their answers to the survey changes in housing choices, housing quality and housing costs and linked these to the policy changes. Housing and care providers reported how their investment strategies were affected. The results of the study reveal how even after a few years the effects of a more demand driven subsidization are visible. Moreover, the study provides an example of how policy outcomes in one policy field (housing) can be affected by policy initiatives in another policy field (care). As such, the study stresses the need for more transversal research in studying housing policy outcomes and the need for an integrated policy approach.
 The presentation of the study will be followed by a presentation of one of the initiatives of the Housing Agency Flanders aiming at a better integration of these two distinct policy fields. The Agency is currently the driver of diverse incentives and experimental innovations for a more sustainable housing policy and initiatives. The Agency launched a call in 2017 for the development of experimental and innovative housing forms, focusing on building ‘common housing’ or ‘leasehold’ models. For a period of 6 years, 28 initiatives can develop an innovative practice exempt from housing regulation. In several initiatives, the aspect of care is intrinsically related to the experiment and innovation. We will present initiatives that provide an inclusive co-housing solution for people who need intensive and long-term care. Goal is to develop new housing initiatives, detect difficulties and gaps in legislation and explore possibilities to enroll these practices in Flanders.

Optimal utility cooperation in the microgrids expansion planning

Economic and technical justification made the government support the utility network's microgrid (MG) expansion. The government subsidy is shifted from renewable energy to MG expansion since they increase renewable generation in a controlled manner. In the proposed method, the utility designs the roadmap of the MGs expansion in the distribution grid. First, the MGs numbers and boundaries are determined based on the utility goals. The utility load points are clustered through the fuzzy clustering method (FCM) and then aggregated via the iterative process to form MGs. Then, the planning model is proposed to minimize the MGs cost while maximizing the utility subsidies. The energy and investment subsidies are modeled through the incentive and punishment mechanism based on the utility goals. Both microgrid cost and subsidy are optimized simultaneously. The proposed method investigates the long-term effect of government subsidies on the MGs expansion through the planning model. The uncertainty of load and renewable energy are modeled through the scenario-based model. In the result section, the subsidization efficiency of the utility is analyzed. The effect of the cost reduction of the DGs and ESSs due to the advances in their technology and the impact of ESSs number on the subsidy efficiency are analyzed. The result determines the roadmap for the government to make optimal decisions in the MGs expansion planning.