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Book part
Publication date: 7 July 2006

Catherine C. Eckel and Philip J. Grossman

An individual should be indifferent between a rebate subsidy of rate sr and a matching subsidy of rate sm=sr/(1-sr), and the total amount received by the charity should be…

Abstract

An individual should be indifferent between a rebate subsidy of rate sr and a matching subsidy of rate sm=sr/(1-sr), and the total amount received by the charity should be the same regardless of subsidy type. Recent laboratory and field experiments contradict these straightforward predictions of standard economic theory: subjects consistently make decisions that result in larger amounts going to the charity under a matching subsidy than under an equivalent rebate subsidy. This paper tests whether this result is due to rebate-aversion – a preference by donors for a match over a rebate subsidy. Consistent with theory, we find no significant preference for one or the other subsidy scheme. However, we do find that, as in previous studies, participants selecting the matching subsidy made decisions that resulted in approximately twice the donations of participants selecting the rebate subsidy donated.

Details

Experiments Investigating Fundraising and Charitable Contributors
Type: Book
ISBN: 978-0-76231-301-3

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Article
Publication date: 19 October 2021

Manman Wang, Menghan Chen and Feng Yang

This paper investigates how a regulator pursuing social welfare maximization designs an optimal subsidy scheme to stimulate technology innovation in the presence of a…

Abstract

Purpose

This paper investigates how a regulator pursuing social welfare maximization designs an optimal subsidy scheme to stimulate technology innovation in the presence of a consumer green premium. Specifically, the authors solve the following questions: (1) Does the consumers' green premium affect the design of the subsidy scheme? (2) How should the firm choose a green technology innovation strategy under the optimal subsidy scheme? (3) Does technology innovation bring higher social welfare and lower environmental impact?

Design/methodology/approach

The authors first develop a game model to explore the impact of subsidy schemes on social welfare without considering technology innovation. Then the authors investigate two innovation strategies, in-house innovation and external introduction, under the optimal subsidy scheme. Finally, they illustrate the optimal choices of innovation strategy for the firm, consumers and regulators.

Findings

The results reveal that the subsidy scheme will not always increase social welfare, which depends on the environmental improvement coefficient of the unit green level. The optimal subsidy level increases with the green premium, but it is not related to the size of the consumer green segment. Moreover, the success rate of in-house innovation will raise the optimal green level, but the company benefits from an increased success rate of in-house innovation only when the green segment is large enough. The green segment size and external green level jointly determine the choice of technology innovation strategy.

Originality/value

This research is the first to analyze this problem while considering the green demand and subsidy scheme simultaneously as drivers of a firm's technology innovation, thereby providing new managerial implications for decisions by the regulator and firms.

Details

Asia Pacific Journal of Marketing and Logistics, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1355-5855

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Article
Publication date: 11 October 2021

Jialin Song, Yiyi Su, Taoyong Su and Luyu Wang

The purpose of this paper is, from a resource accumulation and resource allocation perspective, to examine the variant effects of government subsidies among firms with…

Abstract

Purpose

The purpose of this paper is, from a resource accumulation and resource allocation perspective, to examine the variant effects of government subsidies among firms with varying levels of market power and to test how industry competition moderates the relationship between market power and allocative efficiency of government subsidies.

Design/methodology/approach

This study explores the relationship between government subsidies and firm performance from a resource-based view. The authors study the moderating role of market power and three-way interaction between subsidy, market power and industry competition on firm performance. The authors test their hypotheses using a sample of Chinese A-share manufacturing firms from 2006–2019. The authors apply firm-level panel data regressions and conduct a series of robustness tests. The marginal effect of market power and industry competition is explored via three-way moderator effect models.

Findings

This study finds that government subsidies are negatively related to firm performance. Market power, on average, strengthens the negative effect of government subsidies on performance, but such a reinforcement effect is neutralized when industry competition is intense. Government subsidies are least efficiently used when firms have market power and industry competition is low. In addition, the authors use different forms of firm performance and a various of robustness tests to verify their assumptions.

Originality/value

This paper contributes to the literature as follows. First, the authors look into subsidy–performance problem from the perspective of the resource-based view and contribute to explaining and mitigating the divergence of current findings on the subsidy–performance relationship. Second, the authors introduce market power and industry competition as moderators to study how resource allocative efficiency affects the subsidy–performance relationship. Third, the authors propose that managerial incentives have played an important role in the allocation of government subsidies, which enriches management practices.

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Chinese Management Studies, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1750-614X

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Article
Publication date: 25 January 2013

Huang Chunyan, Zhong Funing and He Jun

The purpose of this paper is to analyze and compare the costs of price and income subsidies when the food security policy targets the urban poor. The result may help…

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Abstract

Purpose

The purpose of this paper is to analyze and compare the costs of price and income subsidies when the food security policy targets the urban poor. The result may help policymakers choose a desired subsidy scheme to ensure food security for the urban poor facing food price surge.

Design/methodology/approach

The analysis consists of three parts: constructing an empirical model on provincial panel data in 1993‐2009 estimating the impact of grain price on food security among urban residents by different income level; evaluating the potential costs of shifting to income subsidy aiming to maintain the real income levels of the low income, lowest income or the poor residents if grain price increases by 20 percent; and comparing with the cost of price subsidy to achieve the same policy goal.

Findings

The paper finds that, food price surge will hurt the urban poor much more seriously than the high income population; the rich residents may receive more benefit from price subsidy; and income subsidy has obviously a cost advantage while the targeted people benefit more.

Originality/value

The obvious value of the paper is to show that income subsidy is much more desired than price subsidy, if the policy goal is to help the poor during food price surge.

Details

China Agricultural Economic Review, vol. 5 no. 1
Type: Research Article
ISSN: 1756-137X

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Article
Publication date: 1 May 1987

Bobby E. Apostolakis

The synchronous failure of conventional policies to achieve “acceptable” levels of employment, growth and price stability has provoked scepticism and led researchers to…

Abstract

The synchronous failure of conventional policies to achieve “acceptable” levels of employment, growth and price stability has provoked scepticism and led researchers to build up a pantheon of countercyclical credit motives. In this article we focus on Greek employment level, a method to promote employment and an empirical investigation. More specifically, using Greek time‐series data we shall concentrate on employment subsidies whose aim is to endorse labour‐intensive technology in Greek production process

Details

International Journal of Manpower, vol. 8 no. 5
Type: Research Article
ISSN: 0143-7720

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Article
Publication date: 1 February 2013

Zesheng Sun and Shuyun Wang

The purpose of this paper is to attempt to expand the traditional economic effect analysis of export subsidy, which has previously ignored the incentive of export subsidies

Abstract

Purpose

The purpose of this paper is to attempt to expand the traditional economic effect analysis of export subsidy, which has previously ignored the incentive of export subsidies in terms of competition from re‐importation.

Design/methodology/approach

The paper performs a comparative static analysis based on the traditional welfare analysis of export subsidies by introducing different transportation costs and using small country model and large country model, respectively.

Findings

Compared with the traditional analysis, exporting countries that implement export subsidies suffer less welfare loss and induce intra‐industry trade of homogeneous products. Due to export subsidy policy incentives, transportation costs heavily influence trade patterns, trade volumes and welfare. Trade patterns evolve from unidirectional export to intra‐industry trade as transportation costs are reduced, with the main source of welfare loss coming from transportation costs. The distribution of export subsidies is biased when domestic transportation costs are high. Under low domestic transportation costs, inefficient intra‐industry trade would emerge as a result of export subsidy incentive.

Practical implications

The findings could be helpful to understand the impact of export subsidy policy on trade pattern, trade volumes and welfare when considering international and domestic transportation cost.

Originality/value

The paper emphasizes the incentive of export subsidy on re‐importation, and links it with transportation costs, which expand the traditional export subsidy analysis.

Details

Journal of Chinese Economic and Foreign Trade Studies, vol. 6 no. 1
Type: Research Article
ISSN: 1754-4408

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Article
Publication date: 1 February 1983

Kjell Grønhaug and Tore Lorentzen

Discusses the importance of government subsidies on the Norwegian export market. Highlights the strength of exports within Norway – 45% of GNP. Examines the various types…

Abstract

Discusses the importance of government subsidies on the Norwegian export market. Highlights the strength of exports within Norway – 45% of GNP. Examines the various types of grant aid available and defines general and specific subsidies and centralized and decentralized subsidies. Outlines the grant application process. Describes a variety of types of export activities which have received subsidies. Explores sources of potential conflict between the firms applying for grants and the government. Concludes, inter alia, that: Size is an advantage when starting exporting or introducing new export activity; The initiative to apply for subsidies requires resources and insight; The perceived usefulness of export strategies varies across firms.

Details

European Journal of Marketing, vol. 17 no. 2
Type: Research Article
ISSN: 0309-0566

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Article
Publication date: 1 May 1992

Azzeddine M. Azzam and Amal Britel

To contribute to the economic understanding of alternativefood‐grain policy options for Morocco, examines the fiscal implicationsof instituting, in addition to the current…

Abstract

To contribute to the economic understanding of alternative food‐grain policy options for Morocco, examines the fiscal implications of instituting, in addition to the current soft wheat subsidy, a consumer and producer subsidy in the related markets of hard wheat and barley. Subsidizing the two related markets has been suggested by some economists as a possible means of alleviating the subsidy burden through shifting supply and demand in the soft wheat market. The analysis shows that the additional subsidies will not alleviate the problem.

Details

Journal of Economic Studies, vol. 19 no. 5
Type: Research Article
ISSN: 0144-3585

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Article
Publication date: 27 August 2021

Dan Wang, Xueqing Wang, Lu Wang, Henry Liu, Michael Sing and Bingsheng Liu

This study aims to develop a Stackelberg Game Model for seeking the optimal subsidy plans with varying levels of government financial capability (GFC). Furthermore, the…

Abstract

Purpose

This study aims to develop a Stackelberg Game Model for seeking the optimal subsidy plans with varying levels of government financial capability (GFC). Furthermore, the scenario-based analysis is conducted and will enable governments to identify a comprehensive subsidy plan as follows: improve project performance and optimise social welfare.

Design/methodology/approach

A Stackelberg Game Model is developed to optimise the effectiveness of subsidies on the performance of public-private partnerships (PPPs).

Findings

According to the scenarios that are generated from the model, governments that are confronting with limited public budgets could reduce the intensity of performance incentives and increase the participation-oriented subsidy. Whilst a participation-oriented subsidy can stimulate private organisations’ willingness to participate in infrastructure PPPs, a performance-oriented subsidy is capable of facilitating the projects’ performances. Intuitively, the performance-oriented subsidy enables the private entities of PPPs to improve their efforts on the projects to realise higher profits. However, the participation-oriented subsidy is unable to affect the level of their effort spent on the projects. To satisfy both parties’ expectations in a PPP, the performance-oriented subsidy needs to be prioritised for a purpose of enabling higher quality outputs.

Practical implications

The game model developed in this study contributes to the literature by offering new insight into the underlying mechanism of governments and private entities, in terms of their decision-making for subsidy planning and contributions (i.e. resource allocation and spending) during the life-cycle of PPPs. This research enriches the government subsidy model by revealing the effects of the GFC and clarifies the impacts of two different schemes of subsidy on the performance of PPPs.

Originality/value

The government has been conventionally viewed as being omnipotent to provide PPPs with a wide range of subsidies. However, the subsidies are not unlimited, due to GFC. In addressing this void, this study has modelled the impacts of government subsidy plans with a consideration of GFC-related constraints. The combined effects of the participation- and performance-oriented subsidies on the project performance of PPPs have been examined.

Details

Journal of Engineering, Design and Technology , vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1726-0531

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Article
Publication date: 1 September 2021

Yatian Liu, Heng Xu and Xiaojie Wang

The presence of asymmetric information exists between firms and the government about the firms' green innovation; this may lead to the firm's moral hazard problem of…

Abstract

Purpose

The presence of asymmetric information exists between firms and the government about the firms' green innovation; this may lead to the firm's moral hazard problem of misusing the government subsidy on the green innovation. Such a problem is not fully considered by the existing literature. The purpose of this study is to explore how government subsidy affects green innovation when the information of firms' innovation cannot be completed observed, and figure out the mechanisms that can alleviate the negative impact of information asymmetry, which helps to explain the factors that motivate the firms to actively engage into the green innovation with the government subsidy.

Design/methodology/approach

In a theoretical model under imperfect information in which the firm's activity on green innovation may not be fully observed, the firm could be either altruistic or not; an altruistic firm has stronger incentive to engage into corporate social responsibility (CSR) activities such as green innovation. With the presence of asymmetric information, the authors analyze the possibility of a firm's moral hazard and try to find out the condition on the information quality that can avoid such problem. To examine the results of theoretical analysis, the authors use the data of Chinese listed companies in a corresponding empirical analysis. On the basis of both theoretical and empirical the authors try to figure out the effect of the government subsidy on the green innovation by enterprise and the role of firm's characteristics of social responsibility and information quality in the green innovation with the government subsidy.

Findings

The results show that the government subsidy can promote the firm's green innovation, especially for those that are more socially responsible. The asymmetric information, however, leads to inefficiency on the green innovation. This is because that the low-quality information about the firm's behavior raises the possibility of a moral hazard. Moreover, the analyst coverage could be an efficient way to improve the quality of information, alleviating the moral hazard problem of the firm's green innovation. The main contribution is to fill the gap in the study of the government subsidy on green innovation under asymmetric information and to provide the mechanism to improve the efficiency of the subsidy to motivate green innovation by enterprise.

Practical implications

A crucial implication to policymakers is to complete and improve the system of information in the market, which can form an efficient incentive compatibility between the enterprises and the public. Such incentive compatibility can attract the enterprises to better use the government subsidy into green innovation and receive a long-run return from the public's positive feedback for their contribution on the social good.

Originality/value

Existing studies are concerned about antecedents of green innovation do not completely focus on the relationship between government subsidy and green innovation. The present paper considers that information asymmetry between the government and firms may affect the impact of government subsidy on the firms' green innovation. This conjecture is studied by the theoretical model and verified by an empirical analysis using the data of Chinese listed companies. Additionally, the empirical analysis explores the moderating effect of CSR characteristics of firms, and the analyst coverage can positively affect the promotion of the government subsidy on the firms' green innovation.

Details

Kybernetes, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0368-492X

Keywords

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