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Policy implications of the CSR in an international transportation market under subsidy

Xu, Lili and Lee, Sang-Ho (2021): Policy implications of the CSR in an international transportation market under subsidy.

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Abstract

This paper focuses on the international transportation market in which a high-speed rail (HSR) firm competes with both the domestic and foreign airline firms providing differentiated transport services. We investigate and compare two types of corporate social responsibility (CSR)—mandatory and voluntary CSR—imposed on HSR under a government subsidy policy. We show that, when the transport substitutability is high (low) in a domestic travel leg, mandatory CSR is lower (higher) than voluntary CSR, and the optimal subsidy under mandatory CSR is lower (higher) than that under voluntary CSR. We also examine the effect of privatization policy of the HSR with transposition subsidy on welfare. We show that full privatization with CSR activities always improves social welfare under an appropriate subsidy, independent of the transport substitutability and types of CSR activities.

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