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.

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.

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.

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.

References in periodicals archive ?
This analysis underscores what airline employees, Members of Congress, and business and community leaders have been saying for months: the subsidized Gulf carriers are distorting the global marketplace, harming the U.
Citizens are able to apply for subsidized housing loans through public calls issued by the government until 31 May 2013.
Public Sector Oil Marketing Companies (OMCs), namely, Indian Oil Corporation Limited (IOC)] Bharat Petroleum Corporation Limited (HPCL) have reported that 10,17,290 LPG connections have been issued after issue of orders on capping of subsidized cylinders," Minister of State for Petroleum & Natural Gas Panabaaka Lakshmi informed the LokSabha in a written reply.
He added that the citizens will be able to save around AED 13000 per annum after new subsidized goods project is implemented instead of AED 1500 they use to save previously.
He also refuted reports about the possibility of selling subsidized loaf of bread at 10 piasters.
Magdy Sobhy, senior economist and deputy director of Al-Ahram Center for Strategic Studies, said that losses incurred by bakeries of LE 20 per 100 kg of subsidized flour may be exaggerated given that specifications for the size and quality of the bread are usually ignored.
To qualify for subsidized guardianship a child must have been removed from his or her home pursuant to either a voluntary placement agreement, or as a result of a judicial determination concluding that residing in the home would be detrimental to the best interests of the child.
This transitional subsidized employment program was developed as a post-assessment activity for participants who remain unemployed or underemployed after receiving services and job search assistance.
Additionally, the complex is the largest federally subsidized rental complex in the country.
Quite apart from everything else in Matt Welch's article with which one might take issue, it is simply a lie that Commentary was ever subsidized by or took a penny from the Congress for Cultural Freedom.
Two Ontario lumber industry associations are heading to court to uphold a ruling under the North American Free Trade Agreement (NAFTA) that Canadian lumber is not subsidized.
person, goods which were substantially identical to such property and which were not manufactured, produced, grown, or extracted in the United States" subsidized contracts qualify for export benefits; see Pegs.