Subsidy

[[File:Subsidy- visualization.jpg|165px|thumb|right|A supply and demand model with a subsidy.]]
{{economics}}
A '''subsidy''' is a quantity of [[money]] given to some entity, industry, or individual by the [[government]]. Subsidies are often given because the [[Free market|market]] may be under-providing some good or service, usually one with social benefits like [[Environmental Protection Agency|environmental protection]], [[education]], or national defense.<ref>Chappelow, Jim. "[https://www.investopedia.com/terms/s/subsidy.asp Subsidy Definition]". ''Investopedia.'' Retrieved 2020-02-11.</ref> 

==Theory==
If an economy is not producing enough of some good or service, governments might have to provide it via a subsidy. Direct subsidies might include offering cash to a firm to do something, or the government establishing its own agency to complete or promote some task. In theory subsidies should provide more benefits than the costs in [[taxation]].<ref>"[https://www.britannica.com/topic/subsidy Subsidy]" ''Encyclopedia Brittanica''. </ref> Subsidies tend to [[Supply curve|increase output]] and increase the price of the subsidized good or service in question.<ref>Kling, Arnold. [https://www.econlib.org/archives/2004/12/subsidies_raise.html Subsidies Raise Prices] ''EconLib''.</ref><ref group=note>Subsidies can be provided to both [[Consumer|consumers]] and producers. Subsidies to consumers lower the prices they pay, while the increase in demand ultimately raises prices.</ref> In practice, subsidies are a highly contentious [[political]] issue. Debates focus on the exact costs and benefits, corruption, favoritism for certain industries, and [[lobbying]].

==Examples==
A number of industries and business can and do receive direct and indirect subsidies. As previously mentioned, most of these can seem benign or even good on paper, but are often highly controversial in [[Reality|the real world]].

===Direct transfers and contracts===
The most obvious type of a subsidy is any direct transfer of funds or contract given to a firm to do something. For example, [[oil]] in [[Nigeria]].<ref>[https://www.bloomberg.com/news/articles/2019-09-26/nigeria-prioritizes-fuel-subsidy-over-health-education-chart Nigeria Prioritizes Fuel Subsidy Over Health and Education] ''Bloomberg''.</ref>

===Intellectual property===
Sometimes [[Patent|patents]] and [[copyright]]s are thought of as a kind of subsidy, encouraging more activity in R&D to produce [[medicine]] that can be [[Patent medicine|patented]]. Examples include the infamous EpiPen.<ref>Keshavan, Meghana. "[https://www.statnews.com/2016/09/09/epipen-lack-of-innovation/ 5 reasons why no one has built a better EpiPen]". ''STAT.'' 2016-09-09. Retrieved 2020-02-11.</ref>

===Interest rates and loans===
Low interest loans or the manipulation of interest rates can be done to increase certain activity, give people a chance at owning a home or just curry favor with potential political supporters.<ref group=note>This can frequently happen in nations without an independent [[central bank]] where governments can control [[money]] for very overt political reasons.</ref>

===Taxes===
On occasion, [[tax]] loopholes and special deductions may favor some firms or actives over others. In the [[United States]] qualifying to write off interest payments for a mortgage loan is a kind of tax subsidy to housing.<ref>McWhinney, James. "[https://www.investopedia.com/articles/mortgages-real-estate/11/calculate-the-mortgage-interest-math.asp Calculating the Mortgage Interest Tax Deduction]". ''Investopedia.'' Retrieved 2020-02-11.</ref>

===Protectionism===
Tariffs can be used to protect domestic industries and domestic producers, helping guarantee them income and employment. This redistributes income to domestic firms from foreign ones and often drives up consumer prices.

===Regulations and zoning===
Increasing the cost of building new apartments can enrich landlords at the expense of renters by denying new entrants into the market. 

==See also==
*[[Tax]]

==Notes==
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==References==
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[[Category:Economics]]
[[Category:Politics]]

Categories: Economics, Politics