Subsidies

(noun)

Financial support or assistance, such as a grant.

Related Terms

Examples of Subsidies in the following topics:

  • Subsidies and Income Supports

    • An agricultural subsidy is a government grant paid to incumbents in the industry to reduce costs and influence the supply of commodities.
    • Another, less direct, form of subsidy is in the taxing system for consumers.
    • Nutrition: Another interesting side effect of subsidies and the artificially reduced price of food is obesity and overeating.
    • Overall, while subsidies are largely a good thing and enable individuals to buy the necessities, there are clear cut downsides to subsidies as well.
    • Analyze the positive and negative affects of subsidies on agricultural economics.

  • Farm Policies and World Trade

    • By the mid-1980s, governments began working to reduce subsidies and allow freer trade for farm goods.
    • While these talks were designed to eliminate export subsidies entirely, the delegates could not agree on going that far.
    • The European Community, meanwhile, moved to cut export subsidies, and trade tensions ebbed by the late 1990s.
    • From Americans' point of view, the European Community failed to follow through with its commitment to reduce agricultural subsidies.
    • Vice President Al Gore called again for deep cuts in agricultural subsidies and tariffs worldwide.

  • Price Supports

    • This can happen in reverse as well in the form of subsidies.
    • Subsidies are the reduction of costs for producers, generally in the form of governmental grants provided to suppliers.
    • This is an interesting economic factor in farm subsidies, as these subsidies are largely going to corporations of substantial size, as opposed to small farmers.
    • The subsidies provide a price floor (or a minimum price in which farmers can be reimbursed for certain products).
    • This chart shows how subsidies and price controls affect supply and demand.

  • Other Barriers

    • Export subsidies: Export subsidies are production subsidies granted to exported products, usually by a government.
    • With export subsidies, domestic producers can sell their commodities in foreign markets below cost, which makes them more competitive.
    • Countervailing duties: Countervailing duties, or anti-subsidy duties, are extra duties levied on imports in order to neutralize an export subsidy.
    • If a country discovers that a foreign country subsidizes its exports, and domestic producers are injured as a result, a countervailing duty can be imposed in order to reduce the export subsidy advantage.

  • Other Approaches to Calculating GDP

    • Two adjustments must be made to get the GDP: Indirect taxes minus subsidies are added to get from factor cost to market prices.
    • GDP = compensation of employees + gross operating surplus + gross mixed income + taxes less subsidies on production and imports.
    • The difference between basic prices and final prices (those used in the expenditure calculation) is the total taxes and subsidies that the government has levied or paid on that production.
    • So, adding taxes less subsidies on production and imports converts GDP at factor cost (as noted, a net domestic product) to GDP.

  • In the 1980s and 1990s

    • Although the 1985 law only modestly affected the government farm-assistance structure, improving economic times helped keep the subsidy totals down.
    • Under the law, farmers would get fixed subsidy payments unrelated to market prices.
    • In 1998 and again in 1999, Congress passed bailout laws that temporarily boosted farm subsidies the 1996 act had tried to phase out.
    • Subsidies of $22,500 million in 1999 actually set a new record.

  • Evaluating Policies

    • Subsidies: The government can utilize subsidies to reduce price points and increase the overall supply within a system .
    • The use of subsidies in developed nations has been a major point of international contention, since they may force developing nations out of the global agriculture market.

  • Public Assistance

    • Subsidy: government funded programs that provide assistance to citizens on federal, state, local, and private levels.
    • Subsidies help to provide food, housing, education, healthcare, and financial support to individuals in need.

  • Supply Function

  • Jobs Argument

    • This idea of limiting outsourcing in light of the protectionist jobs argument has resulted in governmental subsidies that work to offset the costs of manufacturing domestically (in the U.S. particularly).
    • These subsidies are essentially grants or tax breaks for companies operating domestically and creating jobs, driving up employment rates via protectionist strategies.
    • Subsidies: On the other end of the spectrum, and as noted above, governments can provide subsidies to domestic producers to lower their costs and drive up competitive ability.