The Economics of Subsidies
... intervention in the economy. In a competitive equilibrium, the price of each
commodity is equal to its cost of production. Suppose the cost per unit of
output is constant, where cost is defined to include the minimum return on
investment that an entrepreneur requires to remain in business. Since the ...
NEW ZEALAND Removal of agricultural and fisheries subsidies
... In 1986, New Zealand removed all subsidies to the fishing industry. The financial and social
distress that would have been caused by the virtually overnight subsidy removal was dampened
by a major change in fishery management regime. Rights based management was introduced
along with a system of indi ...
Fossil Fuel Subsidy Reform:
... • Without further reform, spending on fossil-fuel
consumption subsidies is set to reach $660 billion in
2020, or 0.7% of global GDP
• GSI estimates + $100 billion for subsidies to producers
... deferrals that reduce the amount of tax that would otherwise be payable.
Overall tax burden by industry: Marginal tax rates are lower than other
Exemptions from excise taxes/special taxes: excise taxes on fuels;
special targeted taxes on energy industry (e.g., based on environmental
Almost half of the world`s oil demand resides in non
... the NOC’s ability to allocate fiscal resources.
o Subsidies favor higher-income households since these households consume larger
quantities of petroleum products and thus benefit from subsidies. By distorting
the price signals, the subsidies can lead to wasteful consumption and investment
A subsidy is a form of financial aid or support extended to an economic sector (or institution, business, or individual) generally with the aim of promoting economic and social policy. Although commonly extended from Government, the term subsidy can relate to any type of support - for example from NGOs or implicit subsidies. Subsidies come in various forms including: direct (cash grants, interest-free loans) and indirect (tax breaks, insurance, low-interest loans, depreciation write-offs, rent rebates).Furthermore, they can be broad or narrow, legal or illegal, ethical or unethical. The most common forms of subsidies are those to the producer or the consumer. Producer/Production subsidies ensure producers are better off by either supplying market price support, direct support, or payments to factors of production. Consumer/Consumption subsidies commonly reduce the price of goods and services to the consumer. For example, in the US at one time it was cheaper to buy gasoline than bottled water.Whether subsidies are positive or negative is typically a normative judgment. As a form of economic intervention, subsidies are inherently contrary to the market's demands. However, they can also be used as tools of political and corporate cronyism.