Subsidy policy selection of elderly care service projects under uncertain actual demand: a real options analysis based on China’s experience

Background Elderly care service projects (ECSPs) aim to provide care services with the help of market forces on the supply side to satisfy the huge demand of the elderly. Subsidies play an important role in motivating the investors to invest in the ECSPs immediately. The optimal subsidy scheme should balance the policy costs and the investors’ interests. Methods Based on the policy background of China, this study applied the real options theory to compare the effects of construction subsidy and operating subsidy on achieving policy goals from the perspective of uncertain actual demand. It introduced numerical examples to identify the optimal subsidy scheme and embedded the data from the Chinese Longitudinal Healthy Longevity Survey (CLHLS) to verify the uncertainty of actual demand. Results The results showed that in the context of uncertain actual demand, operating subsidy has greater advantages in reducing investment thresholds, saving subsidy costs and increasing spillover values. Moreover, a sound quality supervision system, a differentiated operating subsidy scheme and a sustainable growth market demand environment are conducive to increasing the long-term interests of the government and the investors. Conclusions The study emphasized the importance of subsidy selection in the context of uncertain actual demand, and provided a practical reference for policy designers in China and other developing countries to choose the optimal subsidy scheme for the ECSPs.

Effectiveness of Punishment and Operating Subsidy in Supervision of China’s Pension PPP Projects: An Evolutionary Game and Simulation Analysis

Aiming at solving problems of service quality supervision in China’s pension PPP projects, this paper mainly analyses the influences of “punishment” and “operating subsidy” on the evolutionary stability strategies of both players through constructing an evolutionary game model between private investors and government regulators. The results show that improving operating subsidy can effectively motivate private investors to improve service quality, and under the active supervision of government regulators, increasing punishment can restrain private investors from violating rules. If government regulators fail to perform their duties, however, punishment will be ineffective to private investors who have broken the rules. Therefore, the Chinese government should take appropriate measures to improve the sense of responsibility of government regulators who appropriately punish private investors providing low-quality services and appropriately increase operating subsidies to private investors offering high-quality services.

The Deadweight Costs of Operating and Capital Subsidies

This paper determines the deadweight loss of operating and capital subsidies by extending Tullock's (1998) work. It finds that when both subsidies are received deadweight loss is 6.83% of total cost or $0.861 million on the average, $0.780 million when operating subsidy is received and $0.0503 million when capital subsidy is received. Decomposing the deadweight loss using regression shows that the incentive tier of the federal operating subsidy, federal labor protection, fleet size, and the number of maintenance facilities owned are positively associated with it while leasing maintenance facilities and absence of dedicated funding sources are negatively associated with it.

The Chignecto ship railway: a 19th century engineering innovation

Just over a century ago, work commenced on the Chignecto Marine Transport Railway across the Isthmus of Chignecto. The ship railway involved the use of a hydraulic lift to raise large ships on a wheeled cradle. The cradle and the ship were to be towed across the Isthmus by two locomotives and then hydraulically lowered into the receiving waters. The project would transfer ships quicker and be less expensive than building a canal. A private company built the ship railway with the promise of an operating subsidy from the federal government. Financial problems brought the work to a standstill in August 1891. Despite what appeared to be a temporary setback, international economic and national political events prevented completion of the project. Today, the remains of the railbed, an arch culvert, and the foundations of the pump house are all that are left of this 19th century engineering innovation.The contemporary technical literature detailed many of the engineering feats at Chignecto. In 1891, Henry Ketchum, the New Brunswick engineer responsible for the concept and design, presented two concurrent papers on the ship railway to the Canadian Society of Civil Engineers. This paper documents the development of Chignecto Marine Transport Railway. Key words: history, civil engineering, Canadian, shipping, canals, marine railway, and politics.