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.

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.

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.

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.

References in periodicals archive ?
The director general of the CII stated, that it would be unfortunate if the RBI decides to address supply side created inflation through demand constriction by using interest rate as a tool.
com) a print and Internet media company, aims to be among the most trusted resources for the world's energy business both on the demand and supply side of energy.
The supply side interventions will be conducted under LEP
Besides the lacking domestic demand there are two other important factors which darken the economic performance of Germany: tight money policy of the central bank--Deutsche Bundesbank and since 1999 the European Central Bank respectively and the too-narrow supply side orientation of the German governments.
Kelly Bristol has been named show manager of The Supply Side and will report to Robinson.
First, Forbes was proposing a supply side policy that allegedly would encourage individuals and firms to work, save, and invest.
Laffer is partnering with the Texas Public Policy Foundation to create theLaffer Center for Supply Side Economics, with a focus on preserving and promoting supply-side ideas by housing all of his work dating back to the 1970s and providing a forum for new and original research on economic ideas based on the core tenets of supply-side economics.
com), is a fully automated supply side programmatic television platform for linear television.
This project is all about the demand side of the housing market as complementary data on the supply side to visualize.
New Delhi, Oct 31 (ANI): Finance minister Pranab Mukherjee on Monday blamed the supply side constraints in agriculture products for the rising inflation in the country.
In terms of constructing a thesis for the current shortage, several analysts are scrutinizing the supply side.
The supply side can not be in such deep trouble as policymakers, political opposition parties, central bankers, and mainstream economists have been indoctrinated to believe.