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

Abstract

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.

Knowledge Structure and Evolution of Elderly Care Services: A Visualized Analysis

“…Based on a Stackelberg game model, Song et al explore the optimal market-oriented transformation policy of pension services supply to balance the conflicts between private interests and public interests [22]. Two forms of subsidy schemes are compared and the operating subsidy turns out to be superior to the construction subsidy in the context of uncertain demands [23].…”

“…Due to the severe aging trend in China, scholars give more sights to the characteristics of the elderly in China [82]. Taking real cases in China as samples, they make a comparison of subsidy policies which can benefit the endowment service marketization [23]. The exploration of old-age care in a specific context can develop diverse pension modes and formulate appropriate services policies, and promote an integration of several service supply entities, satisfying the personalized needs of elderly population.…”

Exploring the differentiated elderly service subsidies considering consumer word-of-mouth preferences

“…Similar forms of specialized subsidies have been implemented in various countries and regions and have been shown to effectively promote improvements in service quality (Costa-Font et al ., 2022; Lai et al ., 2018). However, while current subsidy policies have succeeded in elevating the quality of elderly services, they have also increased the financial burden on the government (Song et al ., 2022). Therefore, this study aims to explore differentiated elderly service subsidies, thereby promoting quality improvement while alleviating the financial burden on local governments.…”

Impact of the Industrialization of Older Adult Care Services on Older Individuals’ Physical and Mental Health: Evidence from China’s Quasi-Natural Experiment

“…Consequently, significant uncertainties enshroud the authentic demand for care services, 19,20 amplifying investment risks and financial pressures for prospective investors, compelling many to adopt a cautious stance and defer investment within the older adult care service industry. 21 The available literature posits that policy support is pivotal in establishing a sustainable care system by striking a harmonious equilibrium between private and public interests. 22,23 Furthermore, policy support is indispensable in tackling enterprises' financial constraints and nurturing the growth of the older adult care service industry.…”

“…31 By selectively identifying enterprises imbued with considerable potential and substantial benefits, these funds can boost the quality and efficiency of older adult care services. 32 However, extant studies focusing on the promotion of the older adult care service industry through governmental policies have predominantly addressed providing direct subsidies, 16,21,33 Limited attention has been paid to exploring governmentguided investment funds. Further research is warranted to investigate government-guided investment funds' effectiveness and latent advantages within the older adult care service industry.…”