Research On Government Subsidy Mechanism Of PPP Project

Public Private Partnership(PPP),which is a significant innovation in the supply mechanism of public service.This mode can effectively relieve the financial pressure of government and improve the quality and efficiency of public service supply.Meanwhile,the government will pay for the corresponding cost to private sector based on the performance evaluation of their services,so the private sector can obtain a reasonable return,and achieve a win-win situation.Therefore,this mode has been widely used in the construction of infrastructure and public utilities in the world.At present,with the development of urbanization in China,the demand for transportation infrastructure projects are increasing.Chinese government strongly encourages the PPP mode to be applied to the development of those transportation projects.Due to the large amount of projects investment,and the characteristics of quasi-public goods,the current low price system of those projects is not sufficient to pay the investment and operating costs,resulting in long-term loss of item company,so the design of scientific and complete mechanism of government subsidy is helpful to promote the development and stable operation of PPP transportation infrastructure project.The government's financial subsidy for PPP projects should take into account the demands of the two parties of social welfare and private sector investment returns.This paper focus on the problem that how the government makes scientific decision on subsidies in PPP projects with insufficient income.First,through the literature review,we summarized the related research on PPP project subsidy mode and subsidy mechanism.Then,through the multi-objective programming model,this paper analyzes the optimal decision-making behavior of government and private sector in the PPP projects under price subsidies and demand subsidies.The influence of bargaining power on toll price,demand,social welfare and private sector profit is obtained,the optimal subsidy price and the feasible price range are also given when social welfare is optimal and private sector profits meet retention utility.Next,based on the above model,using principal-agent theory and integrating effort parameters of private capital,we constructed the incentive model of government price subsidies and demand subsidies,the optimal effort level of private sector in different circumstances are obtained,the charge price and the subsidized price are also given when social welfare is optimal.The social welfare and private sector profits are analyzed,and get a reasonable incentive subsidy mechanism to maximize social welfare.The results show that,in the case of price subsidy and demand subsidy,the government's optimal bargaining power and the optimal price of the project are the same.When the government's bargaining power is the same and less than the optimal bargaining power,the price of the project is lower and the social welfare is higher in the case of price subsidy mechanism,the profits of private sector are higher in the case of demand subsidy mode.For the incentive subsidy mechanism,we find that the effort level of private sector and the social welfare under the condition of price subsidy are larger than that of demand subsidy,which indicates that the price subsidy mode can improve the level of social capital efforts and the social welfare.