subsidy

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Subsidy

Financial assistance provided by a government to another entity, usually a business or industry. Subsidies are given to keep otherwise unprofitable ventures in business; for example, a family farm unable to compete with agribusiness may receive a subsidy from the government to maintain operations. Subsidies may also exist as a protectionist measure to make domestic goods less expensive than imports. Proponents of subsidies argue that they maintain employment in the domestic economy while critics state that they distort the market and make it less efficient. See also: Bailout.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

subsidy

the provision of finance and other resources by the government or a firm to support a business activity or person. Subsidies can be direct (cash grants, interest free LOANS etc.) or indirect (DEPRECIATION write-offs, RENT rebates) and can be used for a variety of purposes. They include:
  1. PRODUCTION subsidies: the subsidization of suppliers by government to encourage them to increase the output of particular products by partially offsetting their production costs or even financing losses. The objective may be to expand production at a low price of some product which is deemed to be ‘essential’ (for example a particular foodstuff thereby also subsidizing consumers); or, for example, to assist in the start-up of a new firm (see ENTERPRISE INVESTMENT SCHEME) or industry (see INDUSTRIAL POLICY), and encourage firms to locate in particular areas (see REGIONAL POLICY). Also such subsidies are used to support failing firms and declining industries to facilitate orderly restructuring. See PROTECTIONISM;
  2. EXPORT subsidies: the subsidization by the government of exports in general or of a particular product which is exported, as a means of assisting the country's balance of payments;
  3. EMPLOYMENT subsidies: the subsidization of wages by the government as an incentive to businesses to provide more job opportunities, thereby reducing the level of unemployment in the economy;
  4. INCOME subsidies: the subsidization of persons through government transfer payment systems (for example, social security benefits) in order to allow them to enjoy some minimum standard of living;
  5. cross-subsidization: businesses themselves regularly practise internal or cross-subsidization as a means of expanding their activities, for example, using the profits generated by established products to finance NEW-PRODUCT DEVELOPMENT and DIVERSIFICATION into new-product markets.
Collins Dictionary of Business, 3rd ed. © 2002, 2005 C Pass, B Lowes, A Pendleton, L Chadwick, D O’Reilly and M Afferson

subsidy

the provision of finance and other resources to support a business activity or person by the government. Subsidies can be direct (cash grants, interest-free LOANS, etc.) or indirect (depreciation write-offs, rent rebates) and can be used for a variety of purposes, including:
  1. PRODUCTION subsidies: the subsidization of suppliers by government to encourage them to increase the output of particular products by partially offsetting their production costs or even financing losses. The objective may be to expand production of some product at a low price that is deemed to be ‘essential’ (e.g. a particular foodstuff, thereby also subsidizing consumers); or, for example, to assist in the start-up of a new firm (see ENTERPRISE INVESTMENT SCHEME) or industry (see INDUSTRIAL POLICY) and encourage firms to locate in particular areas (see REGIONAL POLICY). In the first cases, subsidies are used as an instrument of income redistribution by reducing the price of products such as bread and milk that figure prominently in the budget of lower income groups or by directly subsidizing incomes.
  2. EXPORT subsidies: the subsidization of a particular product that is exported, or exports in general, by the government as a means of assisting the country's balance of payments.
  3. EMPLOYMENT subsidies: the subsidization of wages by the government as an incentive to businesses to provide more job opportunities, thereby reducing the level of unemployment in the economy INCOME subsidies: the subsidization of persons through government transfer payment systems (for example, social security benefits) in order to allow them to enjoy some minimum standard of living.

Subsidies encourage increased output of favoured products but distort domestic RESOURCE ALLOCATION processes in general and can adversely affect international trade. See REDISTRIBUTION-OFINCOME PRINCIPLE OF TAXATION, PROTECTIONISM, CROSS-SUBSIDIZATION.

See also BOSTON MATRIX.

Collins Dictionary of Economics, 4th ed. © C. Pass, B. Lowes, L. Davies 2005

subsidy

Benefits granted to persons or groups in order to encourage behavior or outcomes deemed important to society. Rent subsidies encourage construction of adequate affordable housing because the owner can be ensured of an income stream as long as the housing meets government requirements.The same subsidy encourages better consumer choices because of the availability of affordable alternatives. Tax credits to contractors for energy-efficient construction are subsidies to encourage the use of energy-efficient alternatives.

The Complete Real Estate Encyclopedia by Denise L. Evans, JD & O. William Evans, JD. Copyright © 2007 by The McGraw-Hill Companies, Inc.
References in periodicals archive ?
The actual figure is probably even higher: Of the 231 government subsidies to Koch companies Good Jobs First found after 2006, 49, or 20 percent, had an "undisclosed" dollar value.
The US tariffs are intended to offset Chinese government subsidies with Titan Wind Energy and related companies hit with a 26 per cent preliminary duty.
The rationale for government subsidies is 1) giving everyone a chance to succeed and 2) promoting economic growth.
CARS of the future will be electric-powered and in the showrooms faster than many people realise - depending on Government subsidies.
Summary: Government subsidies discourage responsible stewardship of Qatar's natural resources, opponents contend
Trade Representative Ron Kirk claiming Canada should be considered in violation of WTO obligations because the Canadian cattle and beef sectors receive government subsidies. "We believe Canada's subsidies on beef and cattle constitute an artificial propping-up of a Canadian cattle industry that is unsustainable at its present size but for those government subsidies," says R-CALF CEO Bill Bullard in a news release.
With the help of government subsidies the women are successfully engaged in the jobs.We are providing the State and the Central Government subsidies for the members.
However, the Bush administration reversed course last year and announced it would treat China in the same way as other countries in disputes involving government subsidies.
said Wednesday that its group had improperly obtained 2.63 billion yen in government subsidies for 22 projects related to a natural gas-fired cogeneration system over the past 10 years.
Travis's dad doesn't understand the ins and outs of the international trade policies and government subsidies that are changing the economics of farming, but he does see that large corporate farmers are taking over (see graphs, above).
In fact, the prices of beef, pork, and chicken are kept low by government subsidies to corn growers.

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