Subsidy Rate Research Articles

Will Port Integration Help Reduce Carbon Emissions and Improve Social Welfare?

In the context of competition between two ports in Cournot, we studied optimal decision-making processes for the government and the port in four different situations before and after the integration of the port based on the subsidy and carbon tax mechanism. We analyzed the impacts of the carbon tax rate and emission reduction subsidy rate on social welfare and determined the optimal carbon tax rate, the optimal emission reduction subsidy rate, the optimal carbon emission level, and the optimal social welfare level in different situations. We also compared the optimal social welfare level and the optimal carbon emission level of the four situations before and after the integration. This research can be used as a policy reference for the government for the formation of environmental policies based on the goal of maximizing social welfare, and it could also be used for the port’s internal decision-making when the environmental policy has been set.

Studying the Complexity of Multichannel Supply Chain with Different Power Structures Under Carbon Subsidy Policy

The game characteristics and equilibrium strategies of a triple-channel supply chain under the carbon subsidy policy are studied in this work with three different game power structures. There are simultaneous decision-making, manufacturer-dominated market and retailer-dominated market. The decision mechanism for order quantity of manufacturer and dual-channel retailer, is discussed. Meanwhile, their complex dynamic characteristics are studied. It is found that when the government implements dual low-carbon subsidies, the supply chain system in which the manufacturer dominates the market is more stable. The government should pay attention to the power structure of the market to determine an appropriate subsidy rate. The over-adjustment of order quantity from manufacturer’s direct sales channel and retailer’s online channel both will lead to large periodical fluctuations in the system, and even bifurcation and chaos. These will cause substantial fluctuations and even loss in the profits of supply chain companies. This analysis shows that delayed feedback can effectively stabilize the periodic bifurcation and chaos in the system.

Research on the Evolutionary Game of Construction and Demolition Waste (CDW) Recycling Units' Green Behavior, Considering Remanufacturing Capability.

At present, China has not yet formed an effective development model for the industrialization of construction waste. The level of construction waste treatment and resource utilization is still low, and recycled products also lack market competitiveness. In order to promote the effective development of the remanufactured construction and demolition waste supply chain better, and based on the present situation, this manuscript establishes a game model for recycling units in two different situations: with and without remanufacturing capabilities. However, most existing studies have determined that all recycling units have remanufacturing capabilities. In the first situation, the main players of the game are recycling units with remanufacturing capabilities and consumers. In the second situation, the main players of the game are recycling units without remanufacturing capabilities and the third-party remanufacturer with remanufacturing ability. Therefore, our research can ascertain the optimal strategy choices of both parties in the game under different return situations and discuss the impact of changes to related parameters through numerical simulations. The results show: (1) When the recycling unit has remanufacturing capabilities, corporate leadership and government supervision rate have positive effects on its evolution to strict manufacturing. Only a high supervision rate can effectively suppress the negative impact of speculative gains and drive the system to (strict manufacturing; positive). Furthermore, the higher the supervision rate, the faster the system will converge. Then, the consumer’s payment difference coefficient has a negative effect on the evolution of the recycling unit to strict manufacturing. The larger the payment difference coefficient, the faster the system will converge to a stable state (tendency to formal manufacturing; negative). (2) When the recycling unit does not have the ability to remanufacture, the government cost subsidy rate and the recycling unit’s effort profit coefficient have positive effects on the recycling unit’s evolution to the direction of effort. Meanwhile, the larger the profit coefficient of the recovery unit’s effort, the faster the system will converge. The conclusions obtained provide certain theoretical guidance for the decision making of CDW recycling supply chain recovery units and relevant government departments.

Policy-Driven Boom and Bust in the Housing Market: Evidence from Mongolia

This paper examines the effects of a mortgage interest rate subsidy on booms and busts in the housing market by analyzing the Housing Mortgage program in Mongolia. We find that the most recent housing boom in Mongolia occurred from the second quarter (Q2) of 2012 to first quarter (Q1) of 2014, and that the subsequent housing bust lasted 4 years. Both house-specific factors and macroeconomic variables had a significant influence on housing price dynamics. Mortgage interest rate semielasticity and real household income elasticity were estimated as −3 and 1.4, respectively. Dynamic analysis of the estimated vector error correction models suggests that the country’s policy intervention in the mortgage market—introducing an interest rate subsidy on mortgage loans for residential properties of up to 80 square meters—drove the recent housing boom in Mongolia.

COVID-19 government support reinforces zombification

We investigate the effect of government support on firm zombification during the COVID-19 crisis for Belgium, Germany, Spain, France, United Kingdom, the Netherlands and the United States. For this purpose, we use a simple model that links insolvency developments at the macro level to GDP developments. We first observe from the data that insolvencies have declined during the crisis despite economic contraction. We then use the model to calculate the total firms saved from insolvency by government intervention and the fraction of which are not healthy, the zombies. It appears that government intervention has been effective in saving firms during the height of the crisis in Q2 of 2020. The impact is smaller in Q3 when the recovery set in. But it comes at a cost of efficiency as it causes significantly higher zombification in the economy. The effect can be seen in both quarters, most notably in Belgium. In Germany and the Netherlands, zombification was low in Q2 but soared in Q3. The reverse effect was visible in Spain as the number of insolvencies picked up in Q3. Therefore, government intervention during the crisis has reinforced the existing trend of zombification there. With government support only gradually withdrawing in the recovery phase of the crisis and probably further pushing up the number of zombie firms, risk management faces the challenging task of detecting them. We offer a few suggestions. These are based on the classification of zombies, including ICR and Tobin’s q, as well as research on underlying drivers. Compared to the sector median, zombies appear smaller, less productive, slower growing, with lower investments and higher leverage despite higher equity issues and implied interest rate subsidies. Complementary to this market-based information, more proprietary, higher frequency data such as payment behaviours, revenue growth pace change, credit sourcing, bank covenant compliance and management competencies can be monitored using scorecards. Finally, we recommend a high level of vigilance and an additional provisioning to anticipate any delayed effects of the crisis.

Optimal strategies of contract‐farming supply chain under the cooperative mode of bank‐insurance: loan guarantee insurance versus yield insurance

AbstractWe investigate the impact of two insurance mechanisms: loan guarantee insurance and yield insurance, on a capital‐constrained contract‐farming supply chain where the farmer is risk‐averse and faces yield uncertainty. Using the sequential model, we derive the farmer's optimal farm size, the agrodealer's optimal wholesale price and the insurance company's optimal premium rate. The result shows that under both insurance mechanisms, premium subsidies can promote the farmer to increase the farm size. However, we find that under loan guarantee insurance, when the premium subsidy is relatively high, the farmer's farm size increases with the poor harvest risk. Under yield insurance, the farmer's conditional value‐at‐risk (CVaR) value increases with respect to the premium subsidy rate. Under loan guarantee insurance, the premium rate increases with respect to the premium subsidy. As a result, the farmer's CVaR value decreases with respect to the premium subsidy rate when it is relatively high. Further analysis indicates that with the same government subsidy expenditure, the efficiency of premium subsidies to increase the farmer's production quantity is better under loan guarantee insurance mode, but the efficiency of premium subsidies to increase the farmer's CVaR value is better under yield insurance.

Macroeconomic, intersectoral, and environmental effects of R&D subsidies in Chile: An input-output approach

The present study simulates subsidies to the R&D in Chile with an intersectoral approach known as the Leontief price model. For this, it has been used information from the Input-Output Tables (IOT), R&D expenditures at the sector level collected from the Survey of R&D Expenditure and Research Personnel, and labor market data available from the National Socioeconomic Characterization Survey. Thus, the official IOT data are broken down into new sectors to represent monetary transactions carried out by the R&D sector. Then, it is possible to obtain changes on macroeconomic, intersectoral, and environmental variables for different subsidy rates throughout the simulations performed with the model. The results show that an increase in R&D subsidies reduces the prices slightly and increases production, employment, and emissions at the sectoral level. Additionally, it is determined that the fiscal expenditure required to finance this subsidy is greater than the stimulus on national production. Finally, it can be concluded that the positive effects appear to be more relevant than negative impacts, so it is recommended to increase the rate of R&D subsidy in the country according to the availability of fiscal resources.

Municipal Bonds as a Financial Component of the Development of Territorial Communities in Ukraine

The world economic thought has a number of tools, the use of which helps attract financial investment and helps accumulate additional funds for infrastructure and social projects of municipalities. The issue of municipal bonds as a financial component of the development of territorial communities is considered vital for this research in which the factors that determine the ability to borrow are highlighted. The advantages and disadvantages of using municipal bonds by local governments are also identified. It is realized that the world experience in the application of municipal bonds is contradictory and ambiguous. It is established that the best results from the use of bonds have been the municipalities of countries with a high level of development and municipal management, which determines the demand for this type of securities from investors. The use of municipal bond in countries with economies in transition has led to a number of municipal defaults, resulting in severe restrictions on their issuance by central authorities. The united communities of Ukraine require additional financial resources. Smaller municipalities are characterized by a high rate of budget subsidies and low average income per community. Ukrainian territorial communities’ municipal bonds are used insufficiently in comparison to developed industrial countries. Factors that shape the risks of implementing a system of local borrowing in Ukraine are identified and include lack of recognition and registration of local governments as legal entities under public law, imperfection of legislation, lack of experience in local borrowing, lack of clear information about the available resources of local communities and their valuation.

Government support for SMEs in response to COVID-19: theoretical model using Wang transform

PurposeMany governments are taking measures in support of small and medium-sized enterprises (SMEs) to mitigate the economic impact of the COVID-19 outbreak. This paper presents a theoretical model for evaluating various government measures, including insurance for bank loans, interest rate subsidy, bridge loans and relief of tax burdens.Design/methodology/approachThis paper distinguishes a firm's intrinsic value and book value, where a firm can lose its intrinsic value when it encounters cash-flow crunch. Wang transform is applied to (1) calculating the appropriate level of interest rate subsidy payable to incentivize banks to issue more loans to SMEs and to extend the loan maturity of current debt to the SMEs, (2) describing the frailty distribution for SMEs and (3) defining banks' underwriting capability and overlap index in risk selection.FindingsGovernment support for SMEs can be in the form of an appropriate level of interest rate subsidy payable to incentivize banks to issue more loans to SMEs and to extend the loan maturity of current debt to the SMEs.Research limitations/implicationsMore available data on bank loans would have helped strengthen the empirical studies.Practical implicationsThis paper makes policy recommendations of establishing policy-oriented banks or investment funds dedicated to supporting SMEs, developing risk indices for SMEs to facilitate refined risk underwriting, providing SMEs with long-term tax relief and early-stage equity-type investments.Social implicationsThe model highlights the importance of providing bridge loans to SMEs during the COVID-19 disruption to prevent massive business closures.Originality/valueThis paper provides an analytical framework using Wang transform for analyzing the most effective form of government support for SMEs.

A mean-field Markov decision process model for spatial-temporal subsidies in ride-sourcing markets

Ride-sourcing services are increasingly popular because of their ability to accommodate on-demand travel needs. A critical issue faced by ride-sourcing platforms is the supply-demand imbalance, as a result of which drivers may spend substantial time on idle cruising and picking up remote passengers. Some platforms attempt to mitigate the imbalance by providing relocation guidance for idle drivers who may have their own self-relocation strategies and decline to follow the suggestions. Platforms then seek to induce drivers to system-desirable locations by offering them subsidies. This paper proposes a mean-field Markov decision process (MF-MDP) model to depict the dynamics in ride-sourcing markets with mixed agents, whereby the platform aims to optimize some objectives from a system perspective using spatial-temporal subsidies with predefined subsidy rates, and a number of drivers aim to maximize their individual income by following certain self-relocation strategies. To solve the model more efficiently, we further develop a representative-agent reinforcement learning algorithm that uses a representative driver to model the decision-making process of multiple drivers. This approach is shown to achieve significant computational advantages, faster convergence, and better performance. Using case studies, we demonstrate that by providing some spatial-temporal subsidies, the platform is able to well balance a short-term objective of maximizing immediate revenue and a long-term objective of maximizing service rate, while drivers can earn higher income.

Progressive biodiesel policy in Indonesia: Does the Government's economic proposition hold?

Crude palm oil (CPO)-based biodiesel is Indonesia's main product as part of the Government of Indonesia's (GoI) biofuel policy to secure energy, reduce trade balance deficit and subsidy, and lower emissions. Indonesia's biodiesel policy is progressive. In late 2019, biodiesel blending reached 30% of fatty acid methyl ester (FAME) and 70% of diesel, known as B30. The government sees the biodiesel policy as beneficial on the basis of its expected diesel import saving. However, it fails to take into account the potential export loss emerging from the opportunity cost of foreign exchange. Moreover, the macroeconomic impacts of biodiesel policy remain understudied. Using available input and output data, CPO and biodiesel projected balance sheets were constructed for 2020 to 2030 based on four biodiesel blending scenarios. Assessments were then made to reveal each scenario's impact on trade balance, subsidy, and land expansion. The present study found that: (1) while the biodiesel policy lowers diesel imports, the potential CPO export loss outweighs the import savings, (2) the biodiesel policy's impact on subsidy is highly dependent on the subsidy rate of FAME and diesel, and (3) land expansion of 48% to 76% of current productive oil palm plantation area is inevitable to support the ambitious biodiesel policy. Overall, the findings indicate that more progressive policies pose greater macroeconomic and environmental risks. The GoI should develop a clear roadmap for optimal biodiesel blending levels to deliver energy security and desirable economic and environmental impacts.

The unintended consequences of the fertilizer subsidy program on crop species diversity in Mali

Over a decade ago, the Malian government launched a fertilizer subsidy program to expand fertilizer use, boost productivity, and ultimately, improve food and nutrition security. The program specifically targets key crops in the socio-economic development of Mali: rice, cotton, maize, millet, and sorghum. All farmers of target crops are eligible to obtain subsidized fertilizer at a quantity proportional to the number of hectares they expect to plant to those crops. Subsidy rates differ by crop. We hypothesize that the fertilizer subsidy in Mali changes the agricultural landscape by distorting the incentives to allocate land both among target crops and between target and non-target crops, with unintended consequences for crop diversification. We apply two econometric strategies to a farm household dataset collected in 2017/18 in the most productive agricultural zones of Mali and test the effects of the fertilizer subsidy program on indicators of crop species diversity. Findings from propensity score analysis and control function approaches reveal that the fertilizer subsidy program incites households to allocate more of their land to target crops, resulting in a greater concentration of area in target crops and reduced evenness of the area distribution among them. These findings raise concerns about how best to achieve food and nutrition security, when a costly program such as this favors a non-food crop (cotton) and starchy staples over other nutrient-dense or high value crops. The environmental sustainability of a program that reduces crop species diversity in an agricultural landscape is also questionable.

Steering the energy transition in a world of intermittent electricity supply: Optimal subsidies and taxes for renewables and storage

Spurred by substantial subsidies, renewable energies have reduced their costs and captured a steadily growing market share. However, the variability of solar and wind power leads to new challenges for power systems. Policy instruments for steering the energy transition towards a zero-carbon future must account for this. We consider an economy in which competitive firms use pollutive fossils, intermittent renewables, and storage for electricity production. A Pigouvian tax is still efficient, because price fluctuations that result from intermittent renewables provide sufficient incentives to invest in storage capacities. However, governments have proved reluctant to impose carbon taxes. Therefore, we examine second-best subsidies when carbon pricing is imperfect. The optimal subsidy rate for renewables decreases as electricity production becomes less reliant on fossils. The storage subsidy is usually negative as long as fossils are dispatched while filling the storage, but turns positive thereafter. This is because more storage capacity reduces the price when stored electricity is supplied to the market, but raises it when storage adds to demand. This has countervailing effects on firms’ incentives to invest in fossil capacities. A numerical simulation illustrates that substantial subsidy payments are required even after fossils have been completely driven out of the market.

Productive efficiency of the pelagic trawl fisheries in the Southern Black Sea

This study aimed to reveal the need for efficient catching activity by comparing the efficiency of pelagic trawl fisheries in Turkey with Stochastic frontier analysis (SFA). For this purpose, data were obtained through face-to-face interviews with 19 vessels randomly selected among 82 fishing vessels during the period. Variables used for technical inefficiency (ui) were determined as professional trawling experience, the total crew, pelagic trawling subsidy rates, and the use of pelagic trawling credits. It was used the FRONTIER 4.1. for Stochastic efficiency frontier calculations developed by Coelli (2007). As a result of the study, it was revealed that an improvement of 26% was required for trawlers to become efficient. Technical efficiency in the sampled vessels ranged from 0.413 to 0.998, with an average of 0.739. According to the results, it was concluded that the efficiency of pelagic trawl fisheries could be increased due to the improvements in the existing structural conditions and the revisions to be made in the policies implemented and the subsidies provided. However, the factors affecting inefficiency seem to be influenced by internal factors such as experience in pelagic trawling, the total crew, and the most critical issue to eliminate inefficiency seems to be increasing the subsidy rate in pelagic trawlers.In this study, it was found that the effects of engine power, total length, fuel consumption and active fishing day reduce the effect of fish catching pressure to a low level. However, other factors affecting this pressure were also included in the model. Especially when it was considered that the use of credit did not affect the efficiency, it was revealed that the increase in the subsidy rates rather than the fuel subsidy would make the trawlers more efficient.

Addressing the life expectancy gap in pension policy

Understanding the systematic relationship between period and cohort life expectancy and how the relationship evolves over time are critical issues in formulating the design of retirement income products, evaluating the actuarial balance of pension schemes, and more generally for all analyses where demographic projections are involved. In this study, estimates of the life expectancy gap at all ages are performed using data for 1960–2018 from the Human Mortality Database and projections are generated through 2050 for the 42 national populations, disaggregated by sex. Contrary to previous research that often uses a single deemed to be «best» model to forecast mortality rates, we use a novel adaptive Bayesian Model Ensemble of heterogeneous parametric generalized age-period-cohort stochastic mortality models, principal component methods, and smoothing approaches. The procedure involves both the selection of the model confidence set and the determination of optimal weights. Model-averaged Bayesian credible prediction intervals are derived accounting for both the uncertainty arising from model error and parameter uncertainty. With intergenerational actuarial fairness and neutrality as the guiding principles the study then explores potential policy interventions to address the consequences of the life expectancy gap - spanning over adjustments in the accumulation, benefit determination, and payout stages. Comprehensive numerical results are provided for two policy options: (i) introducing a sustainability factor; and (ii) conditional pension indexation. The results show that: (i) the life expectancy gap is positive and significant for almost all countries and years studied, (ii) it will continue to increase, (iii) the magnitude of the subsidy rates between generations can be sizeable demanding important initial pension benefit reduction and/or a gradual diminution in the annual indexation rate of pensions to correct them.

Green capacity investment under subsidy withdrawal risk

Subsidies initially installed to stimulate green capacity investments tend to be withdrawn after some time. This paper analyzes the effect on investment of this phenomenon in a dynamic framework with demand uncertainty. We find that increasing the probability of subsidy withdrawal incentivizes the firm to accelerate investment at the expense of a smaller investment size. A similar effect is found when subsidy size as such is increased. When subsidy withdrawal risk is zero or very limited, installing a subsidy could increase welfare. In general we get that the larger the subsidy withdrawal probability, the smaller the welfare maximizing subsidy rate is. Therefore, a policy maker aiming to maximize welfare should try to reduce subsidy withdrawal risk.

Optimal Control of Plant Disease Epidemics with Clean Seed Usage.

The distribution and use of pathogen-free planting material ("clean seeds") is a promising method to control plant diseases in developing countries. We address the question of minimizing disease prevalence in plants through the optimal usage of clean seeds. We consider the simplest possible S-I model together with a simple economic criterion to be maximized. The static optimization problem shows a diversity of possible outcomes depending on economical and epidemiological parameters. We derive a simple condition showing to what extent subsidizing clean seeds relative to the epidemiological features of the disease may help eradicate or control the disease. Then we consider dynamic optimal control and Pontryagin's maximum principle to study the optimal usage of clean seeds to control the disease. The dynamical results are comparable to the static ones and are even simpler in some sense. In particular, the condition on the critical subsidy rate that makes clean seed usage economically viable is unchanged from the static optimization case. We discuss how these results may apply to the control of maize lethal necrosis in East-Africa.

Analysis of epidemic vaccination strategies on heterogeneous networks: Based on SEIRV model and evolutionary game

Nowadays, vaccination is the most effective way to control the epidemic spreading. In this paper, an epidemic SEIRV (susceptible-exposed-infected-removed -vaccinated) model and an evolutionary game model are established to analyze the difference between mandatory vaccination method and voluntary vaccination method on heterogeneous networks. Firstly, we divide the population into four categories, including susceptible individuals, exposed individuals, infected individuals and removed individuals. Based on the mean field approximation theory, differential equations are developed to characterize the changes of the proportions of the four groups over time under mandatory vaccination. Then through the analysis of the differential equations, the disease-free equilibrium point (DFE) and the endemic disease equilibrium point (EDE) are obtained. Also, the basic reproduction number is obtained by the next-generation matrix method and the stability analysis of the equilibrium points is performed. Next, by considering factors such as vaccination cost, treatment cost and government subsidy rate, differential equations are established to represent the change of vaccination rate over time. By analyzing the final vaccination coverage rate, we can get the minimum vaccination cost to make infectious disease disappear. Finally, the Monte Carlo method is used for numerical simulation to verify the results obtained from the theoretical analysis. Using the SARS-Cov-2 pandemic data from Wuhan, China, the experimental results show that when the effectiveness rate of vaccination is 0.75, the vaccination cost is not higher than 0.886 so that the vaccination strategy can be spread among the population. If mandatory vaccination is adopted, the minimum vaccination rate is 0.146.

Determinants of farm profitability in the EU regions. Does farm size matter?

Farms in the European Union come in a wide variety of sizes and the effect of farm size on profitability (return on assets – ROA) has not been sufficiently investigated. The principal goal of this paper, therefore, is to study the determinants of farm profitability using the panels of the Farm Accountancy Data Network (FADN) on farms of different economic size between 2007 and 2018. We use a profitability function based on ratios that show the production and financial management strategies used by the farms. We also analyse the impact of subsidies under the Common Agricultural Policy (CAP). To deal with endogeneity, we run dynamic panel models using the system generalised method of moments (sys-GMM) estimators. We highlight the important role of the high level of equity turnover. An increase in production relative to the farm's equity plays a crucial role in the growth of profitability for all groups of farms, but it is especially important for smaller entities. In addition, farm managers should control the level of debt since the debt-to-asset ratio is a highly significant negative determinant of farm profitability in most of the groups. The increase in subsidy rate generally translates into higher ROA, but this variable has a negative impact across the largest holdings.

A coordination mechanism through cost sharing of corporate social responsibility and government subsidy in a two-echelon supply chain

PurposeThis paper aims to deal with the coordination problem of the supply chain through cost sharing of corporate social responsibility (CSR) and government subsidy.Design/methodology/approachWith respect to the coordination problem of the supply chain with CSR, this paper constructs a three-stage game model consisting of a dominant retailer, n suppliers and government. From the perspective of cost sharing and government subsidies, this paper discussed the decentralized and centralized decision-making, respectively. On this basis, this paper designed a coordination mechanism considering both cost sharing and government subsidies and explore the impact of cost sharing rate and government subsidy rate on CSR efforts, members’ profits and social welfare.FindingsCSR can improve the profits of supply chain members and the overall performance of the supply chain. Then the profits of supply chain nodal enterprises will be affected by the fulfillment level of CSR of their partners. Furthermore, excessive CSR will erode the supply chain profits and cause resource waste. High CSR costs often make retailers low CSR effort level, while a high CSR cost sharing rate can reduce the profits of suppliers and the supply chain. In addition, excessive government subsidies will lead to the decline of social welfare. Excessive government subsidies will cause the dependence of enterprises and affect their operating efficiency.Practical implicationsThe proposed coordination mechanism can effectively do with the coordination problem of the supply chain.Originality/valueThe proposed coordination mechanism considering cost sharing and government subsidies simultaneously can effectively deal with conflict problems and guarantee the supply chain members and the supply chain to maximize their profits and social welfare.