Allocation Of Subsidies Research Articles

Incentivizing environmental investments: The contest-based subsidy allocation mechanism

Governments often provide subsidies to incentivize investments that are considered important for the society. The question is how to distribute those subsidies in the most efficient way. This paper proposes two novel contest-based subsidy mechanisms and evaluates their effectiveness in terms of firms’ environmental investments, profits, consumer and producer surplus, environmental damage and social welfare. In the product green features (PGF) subsidy mechanism firms compete in terms of investment in product green features in order to obtain the highest amount of subsidy. In the CO2 abatement (ABA) subsidy mechanism firms compete in terms of investment in CO2 abatement in order to obtain the highest amount of subsidy. Among other results, we found that the PGF subsidy mechanism is more effective to promote investments in product green features and to increase consumer surplus. However, the ABA subsidy mechanism is found to be more effective in industries or technologies in which the level of emissions is relatively low. However, such environmental policies may lead to inflation, and may not always improve social welfare. This paper opens new avenues of research and thinking in terms of environmental subsidies and policy.

Decision model to optimize long-term subsidy strategy for green building promotion

• The decision model simulates the long-term interactions among stakeholders. • The decision model outputs balance the intertwined interests of stakeholders. • The case study recommends subsidy to homebuyers with price control. • The case suggests two moderators: the premium reduction and subsidy proportion. • The decision model extends the green building movement literature. Green buildings reduce energy use and CO 2 emissions toward the sustainable built environment. The last milestone of the green building movement is to promote public acceptance, while barriers exist such as the incremental cost for developers and the premium price for homebuyers. Subsidy programs are offered by government agencies to address the barriers; however, most of the subsidy strategies highlight the interest of single stakeholder such as government (policy side), developer (supply side), or homebuyer (demand side). This study creates a decision support model using evolutionary game theory to reach an optimal subsidy strategy among multiple stakeholders and increase the green building acceptance. This model considers the interactions of the government, developer, and homebuyer, and seeks their common interests – the long-term benefits for the society in the contexts of green building movement. Demonstrated via a real residential development project, the model identifies the optimal subsidy strategy and associated factors, e.g., subsidy allocation, subsidy proportion, and premium reduction. The results recommend a subsidy strategy to homebuyers as well as combined with price control. The case study also suggests two moderators on the green building market expansion – the premium reduction and subsidy proportion – which depend on the government's budget and ambitions.

An Integrated Data Envelopment Analysis and Non-Cooperative Game Approach for Public Transportation Incentive Subsidy Allocation

As an important national initiative, China’s public transport priority development strategy is conducive to the development of the public transport industry and urban economic construction. However, current public transport operation is inefficient due to the information asymmetry between the government and public transport enterprises, thereby inevitably generating losses. To address the issue of information asymmetry, this study designs a public transport subsidy allocation method from the perspective of incentives and discusses the allocation results using this method through a case study. The rationality of the proposed method and the scientificity and authenticity of the conclusions, are fully explained and demonstrated via the experimental simulation. Based on real published data of public transport enterprises, the proposed method can motivate public transport enterprises to improve their performance. In the case of reporting false data, the proposed method can motivate public transport enterprises to report accurate data.

Performance-Based Transit Operating Subsidy Allocation: A Before and After Study

Transit operating subsidy allocation procedures based on such factors as deficit or population have been under attack ever since operating subsidy became widespread in the 1970s. These procedures do not directly provide any incentive for innovation, cost cutting strategies, and efficient operation. Recognizing the problems associated with a 100 percent population-based formula, the State of Indiana, since 1986, has used transit performance as a part of its subsidy allocation procedure. This paper examines the impact of this procedure on transit system self-reliance, efficiency, and effectiveness by analyzing the relevant data between the periods before and after the procedure was instituted. The results show that the procedure has positively affected transit system performance, particularly for small- and medium-sized properties. The largest positive change has been realized in transit system effectiveness and self-reliance, while no perceptible change was observed in transit system efficiency.

Funding for coronavirus health worker payments

Objective: to conduct an analysis of the channels, the volume of COVID payments to medical workers and assess the preliminary effectiveness of funding for coronavirus health worker payments.Material and methods. Statistical comparative analysis of data in the field of health care funding was carried out. The assessment of changes in the level of wages of medical workers was performed using the index method and the grouping method. Relative indicators of the structure were used to evaluate the distribution of transfers by region. The study was conducted on the basis of open Rosstat data on the salaries of medical workers.Results. The regional distribution of transfers was regulated in 2020 by the Federal Government. The main channel for financing COVID payments to medical workers was the allocation of transfers and subsidies. More than half of the funding was accounted for by transfers for incentive payments to health care workers for fulfilling particularly important works. The largest share of allocated transfers fell on the Moscow Region (5.6% of the total volume of transfers), Nizhny Novgorod Region (5.1%), and Saint Petersburg (5.0%), the lowest – on the Republic of Kalmykia, the Republic of Khakassia, the Amur Region (0.2% each), the Nenets Autonomous District (0.1%). Transfers for incentive payments for special working conditions and additional workload were paid in 2020 in a total of 670 thousand persons. Transfers for incentive payments for fulfilling particularly important works were paid in a total of 363 thousand medical workers and 53 thousand ambulance drivers. An assessment of the effectiveness of financing COVID payments in the form of transfers and subsidies showed that it was largely due to them that the medical workers’ mean salary increased.Conclusion. The distribution of aggregated amounts of transfers between the constituent entities of the Russian Federation was carried out until November 2020 on the basis of the number of persons insured under Compulsory Health Insurance program in a corresponding region. In the early months of fighting the pandemic, the use of this aggregate was appropriate.

Iranian Household Electricity Use Compared to Selected Countries

Buildings account for nearly 40% of energy use in global contexts and climatic conditions tend to contribute to consumption. Human activities are also influential in energy consumption and carbon dioxide (CO2) emissions that lead to global warming. Residential buildings are responsible for a considerable share. There are countries aggravating this situation by heavily relying on fossil fuels. Oil-rich countries are allocating an energy subsidy to the public, making energy cheaper for their consumers. This may result in negative consequences, including households’ inefficient energy use behaviours in countries such as Iran. Beyond the impact of energy subsidy allocation, this study aims to explore the climatic and non-climatic factors that affect the increase in domestic electricity use, particularly in Iran. For this purpose, this study begins with a comparative analysis between countries with and without the energy subsidy to examine the trends in domestic electricity use. Afterwards, the tendency of households’ electricity use in Iran will be analysed in consideration of climatic and non-climatic factors among several provinces in Iran. This study exploited published statistical data for the analysis. The results indicate the tendency of increased domestic electricity use due to the country’s generous subsidy offered to the public as well as climatic and non-climatic factors in Iran. These results may provide an opportunity for future studies regarding building occupants’ inefficient energy use behaviours for policy enactment in Iran and other oil-rich countries.

Farmers' Decision to Adoption of Modern Irrigation Systems Under Risk Condition: Application of Stochastic Efficiency With Respect to a Function Approach

To effectively tackle the issue of increasing irrigation water scarcity, farmers need to convert to modern irrigation systems with lower water use while achieving higher yields and profitability. Unlike the government support to cover a proportion of irrigation modernizing costs by public subsidies in Iran, the adoption rate is low. This is due to farmers' uncertainty about the trade-off between benefits from yield improvement and the added production costs. The historical gross margin of barley, wheat, forage corn, and tomato under surface, drip, permanent sprinkler, and semi-permanent sprinkler irrigation systems was generated using simulation and survey-based data for yield and published data for costs and prices over a 5-year period (2009–2015). The stochastic dominance (SD) and stochastic efficiency with respect to a function (SERF) approaches were used to evaluate the risk efficiency of various irrigation systems for main crops in the Bakhtegan Basin. Estimating certainty equivalent (CE), we ranked irrigation alternatives at different absolute risk-aversion coefficient (ra) levels. The findings show that drip irrigation systems for forage corn and tomato have higher CE values at all levels of absolute risk-aversion coefficient; however, the preferred system for barley and wheat varies with ra. Moreover, estimated risk premiums revealed that risk-neutral farmers would pay to move from surface systems to more efficient systems, whereas risk-averse farmers need to be paid to have the tendency to change their irrigation system. The important policy implication of these results is that risk premiums can consider justifying subsidy allocation in a manner that induces farmers to more risk-efficient irrigation systems.

Fine-tuning energy efficiency subsidies allocation for maximum savings in residential buildings

Energy consumption in buildings accounts for more than a third of European CO2 emissions. The existing building stock shows the most potential for energy savings but at the expense of costly renovations. Thus, public intervention is decisive in driving transformation in this sector. However, policymakers mostly rely on heat estimates to develop energy-saving policies, limiting the possibility of aligning renovation support policy with environmental gain, slowing down the decarbonization effort. This study explores the benefits of using metered heat demand data with detailed building archetypes for impactful renovation subsidy allocation. We quantify the missed CO2 emissions due to inaccuracies in heat demand estimates and develop an optimization model to quantify the impact of such inaccuracies on subsidy allocation. For the case study of Lyngby-Taarbæk municipality in Denmark, we find systematic bias in heat demand estimates that attribute higher heat demand to older houses than reality and inversely to newer family houses. Such bias results in the misallocation of 39% of total CO2 emissions and distortion of 40% of the total subsidy. Ultimately, our results help policymakers identify buildings that should be prioritized for a maximum decarbonization impact.

Government subsidies, ownership structure and operating performance of state-owned enterprises: evidence from China

ABSTRACT Government subsidies have been used as a policy tool by many countries. Given the importance of government subsidies in the context of Chinese economy and state-owned enterprises (SOEs), this study seeks to understand the role played by government subsidies in the operating performance of Chinese SOEs. Using panel data on Chinese SOEs to construct the fixed-effects regression models, this study examines the effects of government subsidies and explores the moderating role of ownership structure in the correlation between government subsidies and operating performance of SOEs. Government subsidies have improved the operating performance of SOEs through easing financial constraints and stimulating research investment. However, high proportion of state-owned shares is not conducive to the positive effect of subsidies. The heterogeneous analyzes show, for SOEs located in eastern China, at the local level or with a higher R&D level, an increase in state-owned shares is more detrimental to the positive effect of subsidies on their performance. Tax-based-subsidies have significantly positive effect on the operating performance of SOEs, with the state-owned shares exerting a negative moderating effect on this positive correlation. Based on the empirical findings, we propose some policy suggestions for the mixed ownership reform of Chinese SOEs and reasonable allocation of government subsidies.

An evolutionary game-theoretic approach to study the technological transformation of the industrial sector toward renewable electricity procurement: A case study of Iran

Electricity shortages severely affect the production chain and cause damage to manufacturing productivity. This study examines how the industrial sector can transform technological innovations toward renewable electricity procurement. We consider two strategies for manufacturers: purchasing electricity from a technology-based supplier (TB strategy) and purchasing it from a non-technology-based supplier (NTB strategy). Manufacturers need technological transformation, such as upgrading their electrical system toward digitalization to manage power outages. We examine manufacturers’ pricing decisions and their long-term behavior to adopt the TB and NTB strategies using a one-population evolutionary game-theoretic approach. Also, we investigate the majority of manufacturers’ population that eventually choose the best strategy. Moreover, we apply the present model to real-world cases of Iran’s cement, steel, and paper industries. The results show that the evolutionary behavior of sectors with high annual electricity consumption, such as steel, converges to the TB strategy faster than cement and paper industries. In contrast, the cement and paper industries are more sensitive to subsidy allocation than the steel industry with respect to electricity procurement strategies.

Digitalization of Economic Management Processes in the Context of the Land Policy of Northern Kazakhstan

In the context of the continuous economic development of the Republic of Kazakhstan within the framework of the country’s popularized integration into the EAEU, increasing the level of digitalization in the context of science, technologies of state, and business management is becoming increasingly important. The article aims to consider the transformation of land policy management on the example of the Northern region of the Republic of Kazakhstan based on digitalization by assessing the effectiveness and availability of the Qoldau.kz service. In the course of writing the work, an author’s study was carried out using the Varimax method, aimed at determining the key factors characterizing the effectiveness of the Qoldau.kz service. The study results confirm the interconnection of critical aspects of the digital transformation of public administration in the context of the implementation of land policy in Northern Kazakhstan through the optimization of the Qoldau.kz service. The study results also determine the relationship between the low number of active users of the site and the complexity of its device, the need to have special practical skills, and the high cost of maintenance. To optimize the operation of the service in the context of land policy management, the authors proposes recommendations to simplify the process of obtaining a benefit, reduce the cost of service, minimize the corruption component in the allocation of subsidies, and the need to increase the popularity of the service among key recipients of services.

Socioeconomic and demographic disparities in residential battery storage adoption: Evidence from California

There is growing interest in the adoption of residential battery storage because of its ability to provide bill savings, capture excess solar energy, and provide resiliency value. The resiliency benefits have become increasingly salient in light of recent large-scale power outages. However, these benefits may not accrue to all communities. We explore the presence of disparities in residential battery adoption and the allocation of subsidies under California's Self-Generation Incentive Program (SGIP) by measures of income, race and ethnicity, and a vulnerability index that captures environmental justice (EJ) concerns. We present evidence that battery adoption and subsidy allocations are concentrated in communities that have higher household income and lower EJ concerns. Regression analyses demonstrate that there are disparities in battery adoption rates by household income and race/ethnicity demographic variables, after controlling for important time-varying and regional factors. These findings persist despite the fact that the SGIP has specific funds targeting lower income households and communities, as well as funding targeting wildfire- and outage-vulnerable households. We demonstrate that these findings can be partially, but not fully, explained by SGIP funding eligibility criteria that correlate with communities that have higher income, lower EJ concerns, and a lower percentage of residents of color.

Rural development funding and wildfire prevention: Evidences of spatial mismatches with fire activity

The European Union Rural Development Program (RDP) is a major driver of landscape change over time in Europe. In a context of climate and land use changes and consequent fire risk exacerbation, understanding the possible contribution of RDP measures to wildfire risk mitigation could help planning subsidies allocation criteria in a more efficient way for fire prevention. However, little is known on the links between the spatial allocation of RDP subsidies, relevant for wildfires prevention, and the spatial distribution of fire activity. Our study aims to fill this knowledge gap through an exploratory analysis carried out in Italy and based on fire activity indicators of the period 2007–2017, RDP expenditure at municipal level in the period 2017–2013, and a series of ancillary indicators. We selected RDP measures specifically addressing wildfires (direct prevention) and those whose implementation has an impact on fire regime (indirect prevention). Our results suggest a low association between RDP expenditure for fire-related measures and subsequent reduction of wildfire activity. Principal Component Analysis suggests a role of managed rural areas in mitigating fire activity, as well as a spatial mismatch between wildfire prevention expenditure and high fire activity contexts. We claim the need for a deeper integration of territorial planning information within the RDP funding allocation criteria. Also, integrating RDP indirect prevention measures within fire management plans would be a cost-effective approach to leverage the impact of public policies on wildfire risk management, by allocating the limited financial resources to high-risk areas.

The medicaid windfall: Medicaid expansions and the target efficiency of hospital safety-net subsidies

Federal hospital safety-net subsidy programs seek to defray costs of uncompensated hospital care, but eligibility criteria are based on Medicaid volume. Therefore, subsidies have poor “target efficiency”: hospitals that provide large amounts of uncompensated care may not receive subsidies (exclusion error), while hospitals that provide little uncompensated care may receive subsidies (inclusion error). Medicaid expansions may exacerbate poor targeting by increasing Medicaid patient volume while reducing uncompensated care. Using hospital administrative data from 2003 to 2019, I quantify the target efficiency of Medicare and Medicaid Disproportionate Share Hospital payments and the 340B drug discount program and quantify how changes in Medicaid eligibility affect safety-net subsidy receipt and target efficiency. I find that the ACA Medicaid expansion increased participation in Medicare DSH and 340B, especially among non-safety-net hospitals (inclusion errors) resulting in a shift of approximately $5B from safety-net to non-safety-net hospitals. I find the opposite for a Medicaid contraction in Tennessee in 2005. My results demonstrate an unintended consequence of Medicaid-based eligibility criteria: changes in Medicaid coverage affect the allocation of public subsidies for safety-net patients.

Equitable decarbonization of heat supply in residential multi-apartment rental buildings: Optimal subsidy allocation between the property owner and tenants

The core objective of this work is to demonstrate equitable decarbonization of heat supply in residential multi-apartment rental buildings. A modeling framework is developed determining a socially balanced financial governance support strategy between the property owner and tenants to trigger a heating system change. The results of different decarbonization scenarios of a partly renovated old building switching from gas-fired heat supply to either the district heating network or being equipped with a heat pump system show that an equitable heating system change is possible, but with massive public subsidy payments. Particularly, the investment grant to the property owner and additional rent-related revenues due to building renovation are decisive for the profitability of the investment. Simultaneously, subsidy payments to the tenants are required at the beginning of the investment period to limit their energy and rent-related spendings. Results also show that the heat pump alternative is not competitive compared with district heating, even in case of extensive retrofitting of the building. Allocating the costs of inaction (opportunity costs associated with rising CO2 prices) between the governance, property owner, and tenants turns out as an important lever, as required subsidy payments can be reduced significantly.

Simultaneously consideration subsidy allocation and target setting in low-volume offshore ferry routes: an empirical study of Taiwan companies

To satisfy the need for resident transportation between offshore islands and a mainland, and among offshore islands, some ferry firms are asked to run low-volume routes. Since low-volume routes often bring losses to operators, the government may provide compensation to those offshore ferry routes. However, the current subsidy methods may result in operating inefficiency. Also, the previous studies lack a mechanism for auditing the performance of these ferry routes while considering subsidies. In order to solve these problems and consider the operational characteristics of ferry routes and the fairness of input and output multipliers, this study proposes a different performance-based mechanism built by a cross-efficiency two-stage network data envelopment analysis to allocate subsidies and set targets for individual offshore ferry routes. By setting targets, the government can supervise subsidy usage. An empirical example of seven offshore ferry routes in Taiwan is illustrated. The different results of allocation between stages can be found for all routes and the individual intermediate product and final output targets can be set for all routes. The results provide constructive suggestions for the policymaker on how to allocate subsidies and set targets among offshore ferry routes.

Direct State Aid Measures for Agriculture and Rural Development in Latvia

Development of agriculture is a substantial element of a balanced development of a country, comprising the development of agricultural, forestry and fishery sectors as well as the aggregate of other economic, social, and ecological activities related to the rural environment. The two main types of state aid provided to agriculture and rural development include direct and indirect support. The state aid shall be fully consistent with the basic guidelines of the European Community regarding the support for agriculture. The aim of the research is to discuss the legal regulation in the sphere of state aid allocation and to analyse the dynamics and impact of allocated national subsidies for the development of agriculture and rural development. Currently, the requirements for allocation state aid in the form of subsidies undergo fundamental amendments within the framework of simplification of regulatory enactments of the EU CAP. The amendments relate to both the content and procedures of the requirements. The goal is to speed up the conformation and approval of state aid payments and to simplify the requirements for allocation of subsidies. It is envisaged that the amendments would not affect the targets of subsidies but they would provide more earmarked state support.

Natural resources and assets accountability audit of local officials and government subsidies: evidence from China

ABSTRACT In 2014, the Chinese central government required implementing natural resource and asset accountability audit for local officials to promote environmental governance. From the perspective of government subsidy allocation, this paper examines whether and how the new government audit policy influences the strategy of local governments to high-polluting firms. We adopt a multi-period difference-in-difference research design and find that after the policy implementation, local officials pay more attention to local ecological performance, thus, reducing the government subsidies to high-polluting enterprises. They also reduce support for high-polluting by reducing tax incentives. These findings document that the implementation of government audit policy weakens the collusion between local officials and high-polluting firms, which enriches the intercross investigation between government audit and environmental governance.

Crises and changes: The impacts of CSR expenditure on loan and subsidy allocation in China's Pre- and Post-Pandemic periods

China's governments reward corporate social responsibility (CSR) by granting subsidies or loans. Using China's listed firm data, we prove that firms with higher CSR expenditure levels are granted more loans than subsidies before the COVID-19 outbreak. However, in the post-pandemic period, the impact on loans is mitigated but that on subsidies is enhanced. This reverse phenomenon is more significant for politically connected firms, state-owned enterprises and regions with a low marketisation level. We show that subsidies are beneficial for firm value in the post-pandemic period. These findings indicate that China's governments cooperate with prosocial firms to revive the economy.

Simulating the effect of the Pay-as-you-go scheme for solar energy diffusion in Colombian off-grid regions

Providing affordable and clean energy for all is a global priority, especially for off-grid and low-income regions. New business models, such as Pay-as-you-go (PAYG), has been a strategy for providing sustainable electricity in off-grid regions, especially in African countries. However, there is a need for analysis tools, such that we can test upfront the potential for this scheme varies according to local context. In this paper, we propose the use of system dynamics for energy policy assessment. We set-up the methodology considering the off-grid context, and then we developed a system dynamics model to assess the effect of the PAYG scheme in the diffusion of solar energy in off-grid and low-income regions. The method is tested using a case study, the Colombian case. The application of the methodology depicts simulations that indicate that effect of PAYG is limited under the current market conditions of Colombian off-grid regions, considering that solar companies obtain most of their income directly from Government's subsidy. Better results are obtained when implementing PAYG in a lower subsidy scenario, which indicates the potential to optimize the allocation of subsidies. We finally discuss the importance of the local conditions to use the proposed methodology.