Subsidy

A subsidy (also known as a subvention) is a form of financial assistance paid to a business or economic sector. Most subsidies are made by the government to producers or distributors in an industry to prevent the decline of that industry (e.g., as a result of continuous unprofitable operations) or an increase in the prices of its products or simply to encourage it to hire more labor (as in the case of a wage subsidy). Examples are subsidies to encourage the sale of exports; subsidies on some foods to keep down the cost of living, especially in urban areas; and subsidies to encourage the expansion of farm production and achieve self-reliance in food production.[1]Subsidies can be regarded as a form of protectionism or trade barrier by making domestic goods and services artificially competitive against imports. Subsidies may distort markets, and can impose large economic costs.[2] Financial assistance in the form of a subsidy may come from one's government, but the term subsidy may also refer to assistance granted by others, such as individuals or non-governmental institutions.

Indirect subsidiesIndirect subsidy is a term sufficiently broad that it may cover most other forms of subsidy.[citation needed] The term would cover any form of subsidy that does not involve a direct transfer.[edit] Labor subsidiesA labor subsidy is any form of subsidy where the recipients receive subsidies to pay for labor costs. Examples may include labor subsidies for workers in certain industries, such as the film and/or television industries. (see: Runaway production Housing subsidiesInfrastructure subsidiesIn some cases, subsidy may refer to favoring one type of production or consumption over another, effectively reducing the competitiveness or retarding the development of potential substitutes. For example, it has been argued that the use of petroleum, and particularly gasoline, has been subsidized or favored by U.S. defense policy, reducing the use of alternative energy sources and...