A Subsidy That is Inversely Related to the Product Price

• 成果类型: Article
• 署名作者: Kiso, Takahiko
• 署名单位: University of Aberdeen
• 刊物名称: ECONOMIC JOURNAL
• ISSN/ISSBN: 0013-0133
• DOI: 10.1093/ej/ueac002
• 发表日期: 2022
• 页码: 2173-2206
• 关键词: ad-valorem; tax incidence; unit taxes; oligopoly; TARIFFS; MARKET; games

摘要

This study considers a new subsidy design to support the purchase or production of target products. Under the proposed design, subsidy payments are inversely related to product prices. Compared to 'flat' subsidies, this design reduces producers' market power and the subsidy benefits passed on to them, improving the cost-effectiveness of government spending (by up to 50% according to simulations based on an actual subsidy programme). Additionally, this subsidy's cost-effectiveness and incidence can be adjusted flexibly by changing the policy parameters. Finally, the subsidy design can be modified to provide larger payments to higher-quality products, thereby offsetting disincentives for quality improvement.