supply-side economics

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Supply-side economics

A theory of economics that reductions in tax rates will stimulate investment and in turn will benefit the entire society.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

Supply-Side Economics

A macroeconomic theory that a government can best promote growth by providing incentives for persons to produce goods and services. The primary way a supply-side oriented government does this is by maintaining low tax rates so that investors and entrepreneurs may use their money toward production. Maintaining low tax rates on the wealthy is one of the most important and controversial aspects of supply-side economics; the theory states that well off persons have the capital available to produce goods and services and thereby create jobs and grow the economy. Critics contend that this does not happen in reality, and that the wealthy are more likely to keep, rather than invest, their money. In the United States, supply-side economics was crucial to the economic policy in the Ronald Reagan administration. See also: Keynesian economics, Monetarism, Trickle-down economics.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

supply-side economics

The branch of economics that concentrates on measures to increase output of goods and services in the long run. The basis of supply-side economics is that marginal tax rates should be reduced to provide incentives to supply additional labor and capital, and thereby promote long-term growth.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.

supply-side economics

the branch of economic analysis concerned with the productive capability of an economy (POTENTIAL GROSS NATIONAL PRODUCT) and with policies that attempt to expand the stock of factors of production and to improve the flexibility of factor markets so as to generate the largest possible output for a given level of AGGREGATE DEMAND. Supply-side economists have examined institutional rigidities in factor markets and the effect of higher factor prices in ‘pricing people out of jobs’. This has led them to condemn the activities of trade unions in labour markets on the grounds that trade unions impose RESTRICTIVE LABOUR PRACTICES (such as overmanning and demarcation boundaries) and push WAGE RATES up to levels that exceed the MARGINAL REVENUE PRODUCTIVITY of the workers concerned, thereby causing UNEMPLOYMENT and COST-PUSH INFLATION. Such ideas have also led supply-side economists to condemn certain SOCIAL-SECURITY BENEFITS systems and PROGRESSIVE TAXATION systems for creating a POVERTY TRAP that acts as a disincentive for the unemployed to take low-paid jobs.

More broadly, supply-side economics has been concerned with ways in which the AGGREGATE SUPPLY SCHEDULE can be shifted outwards so as to enable more output to be produced in response to growing aggregate demand without raising the PRICE LEVEL.

Governments may adopt supply-side policies to increase the stock of factors of production and to improve the efficiency of resource use by promoting the flexibility of markets in responding to demand changes. These policies include reductions in taxation and other disincentives to work to increase labour participation rates; financial incentives to increase capital investment in plant and equipment and promote similar investments in process and product invention and innovation; education and training policies to improve the supply of required skills; more competition in the financial sector to improve the efficiency of capital markets; privatization and reduced government control of industry (deregulation) to encourage industrial efficiency; regional policy assistance, private rented accommodation and portable pensions to encourage labour mobility; lower tax rates and changed social security benefits to provide incentives to work harder and take risks; curbs on the power of trade unions to improve the flexibility of labour markets, wider share ownership and assistance to the self-employed to promote enterprise culture. These measures can help to increase economic growth rates and reduce unemployment. See also NEGATIVE INCOME TAX, PROFIT-RELATED PAY, LAFFER CURVE.

Collins Dictionary of Economics, 4th ed. © C. Pass, B. Lowes, L. Davies 2005
References in periodicals archive ?
But if running a high-pressure economy stimulates the supply side, we might expect a further acceleration in capital investment that not only charges the demand side of the economy, but accelerates productivity growth, too.
Mobfox is a world-leading, data-driven, mobile supply side platform and exchange, providing app developers and publishers the most advanced tools to manage their media smarter.
On the supply side, IP bounced back into positive territory in June, but only slightly so (to +0.1% yoy from -1.4% yoy in May).
It is therefore, clear that policy response to supply side issues were not well conceived and large part of newly installed capacity remained idle, placing additional financial burden on the economy.
However, he refused to accept that the same could happen on the supply side. He could not envision any supply-side uncertainties that he couldn't manage around--and the audience agreed with him.
Speaking at the Legislative Yuan the other day, Yang Chin-lung attributed the mounting inflationary pressure to oil price and power rate hikes, which impact the supply side. To offset the impact, the Ministry of Finance (MOF) must cut tariffs and excise tax, or other measures from the supply side, and monetary policy on the demand side can only produce limited effect, according to Yang.
T he outlook for traffic growth driven by technology breakthroughs on the supply side and creative ideas on the demand side is very strong.
On the supply side the five key issues that need to be addressed for unleashing India's growth potential have been identified as -- the quantity and quality of physical infrastructure, skill shortages in its bulging population, faltering agriculture and consequent high food inflation, fiscal inflexibility to spend on health, education and physical infrastructure, and a governance deficit.
On the supply side, obesity might affect a person's ability to work--due to poor health, perhaps, or low self-esteem.
Virgo Publishing (Phoenix, AZ) has begun the publication of "Supply Side Inside Cosmeceuticals," a new magazine that is the official publication of George Little Management's Supply Side cosmetic and personal care trade shows.
On the supply side, political strife in Iraq, other oil-rich Middle Eastern countries, and Nigeria have caused disruptions to oil supplies.