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 ?
Finally, it should be noted that the suggested institutions and the investment formulas may be applicable to most developing countries in order to fulfill the social and economic objectives of subsidizing housing sector.
Not to mention subsidizing Colombians and Brazilians, where gas prices are much higher.
However, the proposed state initiatives unreasonably shift this burden entirely to policy holders, even to the extent of subsidizing the research and development costs of drugs unapproved by FDA.
Before they tax some interest or activity, they should check to see that they are not already subsidizing it.
The Canadian International Trade Tribunal (the Tribunal) today initiated a preliminary injury inquiry into a complaint by Compagnie Selenis Canada, of Montreal, Quebec, that it has suffered injury as a result of the dumping and subsidizing of polyethylene terephthalate resin from the Peoples Republic of China, the Republic of India, the Sultanate of Oman and the Islamic Republic of Pakistan.
On October 17, 2017, the Tribunal will determine whether there is a reasonable indication that the alleged dumping and subsidizing have caused injury.
With the decision for subsidizing the interest rate by the Government, the costs for these credits are considerably reduced, which is an additional support for small and medium businesses in supplying cheaper funds for financing their business activities.
The rest of society is subsidizing her staying in the apartment at a below market rent.
The Canadian International Trade Tribunal (the Tribunal) today initiated a preliminary injury inquiry into a complaint by Supermetal Structures Inc., of Lvis, Quebec, Supreme Group LP, of Edmonton, Alberta, and Waiward Steel LP, of Edmonton, Alberta, that they have suffered injury as a result of the dumping of certain fabricated industrial steel components from the Peoples Republic of China (China), the Republic of Korea, the Kingdom of Spain, the United Arab Emirates, and the United Kingdom of Great Britain and Northern Ireland and subsidizing of certain fabricated industrial steel components from China.
"We are all subsidizing the Class I's," said Jeffrey R.