SupplySide Subsidies, DemandSide Subsidies and Subsidy Backslope Policy：A Study on a DSGE Model with Three Sections
- LIU Xiangfeng
- Zhejiang University of Finance & Economics,310018
In this paper, we use the three-sector DSGE model to analyze the dynamic effect, conduction mechanism and the differences between the supply-side and demand-side subsidies. Based on this, we use the economic data from 1952 to 2015 in China to calibrate the parameters, take sensitivity analysis and welfare loss analysis to evaluate the subsidy policy. This paper concludes as follow. (1) In the short run, demand-side subsidies have a greater promoting effect on consumption, output and labor input. (2) From the effect of subsidy implementation, incentive effect of demand-side subsidies is relatively lagging, and supply-side subsidies will permanently improve consumer purchasing power, while inflation and real interest rates are relatively neutral. (3) Demand-side subsidies will be more suitable for subsidies and backslope policies from the perspective of social welfare. The critical point for the magnitude of its subsidies to be set off should be around 14%. Subsidies that are “leaving” too quickly will have a fatal blow to industries, especially emerging industries. Accordingly, this paper puts forward that we should firstly focus on the demand-side subsidies and the extent of backslope when formulating and implementing the policy of subsidy de4-escaping. Optimizing the effect of supply-side subsidies is still the same core work, and formulating and improving the corresponding subsidy regulation policy is a policy guarantee that supply-side subsidies play an incentive role.
JEL： C51, E12
- Supply-Side Subsidy, Demand-Side Subsidies, Subsidies Fall Off, DSGE Model