Subsidy

Loading the player...

What is a 'Subsidy'

A subsidy is a benefit given by the government to groups or individuals usually in the form of a cash payment or tax reduction. The subsidy is usually given to remove some type of burden and is often considered to be in the interest of the public.

Politics play an important part in subsidization. In general, the left is more in favor of having subsidized industries, while the right feels that industry should stand on its own without public funds.

BREAKING DOWN 'Subsidy'

There are many forms of subsidies given out by the government, including welfare payments, housing loans, student loans and farm subsidies. For example, if a domestic industry, like farming, is struggling to survive in a highly competitive international industry with low prices, a government may give cash subsidies to farms so that they can sell at the low market price but still achieve financial gain.

If a subsidy is given out, the government is said to subsidize that group/industry.

RELATED TERMS
  1. Countervailing Duties

    Tariffs levied on imported goods to offset subsidies made to ...
  2. Mortgage Subsidy Bond

    One of the few types of municipal bonds ever issued that may ...
  3. Market Distortion

    An economic scenario that occurs when there is an intervention ...
  4. Federal Subsidy Recapture

    The Federal subsidy recapture is the repayment of all or part ...
  5. Cost-Sharing Reductions

    A type of federal subsidy distributed as discounts that help ...
  6. Green Chip Stocks

    Shares of companies whose primary business is beneficial to the ...
Related Articles
  1. Markets

    What's a Subsidy?

    A subsidy is a benefit given to an individual, business or institution, typically by the government. Subsidies are given to promote a social good or an economic policy. The government usually ...
  2. Personal Finance

    The Government And Risk: A Love-Hate Relationship

    Though the U.S. government can help its citizens by subsidizing risky loans, the costs always come back to the taxpayers.
  3. Markets

    Understanding How Oil Companies Pay Taxes

    Read about how big oil corporations pay taxes, and learn about tax exemptions and the option to defer. Discover the argument about big oil being given tax exemptions
  4. Markets

    How Governments Influence Markets

    The biggest influence in the markets today can create some unintended consequences.
  5. Personal Finance

    Low-Income Households to Get Broadband Subsidy

    The FCC's recently approved broadband subsidy for low-income households should help many people get online. Not that everyone's in favor of it.
  6. Markets

    3 Times the WTO Got It Right This Century

    Learn how the World Trade Organization (WTO) is facilitating landmark trade agreements that benefit both corporations and consumers.
  7. Personal Finance

    Qualifying for Lower Premiums and Out-of-Pocket Expenses

    Many people will qualify for new federal subsidies that can help lower health costs, both the premiums and the care itself. When you get coverage through the Marketplace, you may be eligible ...
  8. Markets

    All About Government Loans

    There are many reasons to seek a government loan rather than one from a private lender. Government loans typically have low interest rates and offer fixed or subsidized options, as well as deferred ...
  9. Retirement

    Petrobras Impact on the Brazilian Economy

    How the Petrobas scandal has shaken the Brazilian economy.
  10. Markets

    Oil Investments Boost Egypt's Recovery Prospects

    Major foreign oil companies have provided a big boost to the Egyptian economy by agreeing to invest around US$17 billion in the country's energy sector.
RELATED FAQS
  1. How does a government decide what industries to subsidize?

    Learn about the political, economic and developmental arguments in favor of providing public subsidies to industries. Read Answer >>
  2. How are subsidies justifiable in a free market system?

    Learn some of the arguments in favor of or against providing subsidies in a market economy, including economic and political ... Read Answer >>
  3. What are some examples of failed subsidies?

    Learn about the competing political and economic methods of evaluating government subsidies, and how to distinguish between ... Read Answer >>
  4. How do government subsidies help an industry?

    Understand how government subsidies can help an industry, on both the consumer and supplier side. Learn the potential drawback ... Read Answer >>
  5. How do government subsidies affect the profitability of the airline industry?

    Read about the history of government subsidies to American airline companies since 1918, and why it benefits large companies ... Read Answer >>
  6. What are the ethical arguments against government subsidies to companies like Tesla?

    Learn about the ethical argument behind government subsidies. Read Answer >>
Hot Definitions
  1. Diversification

    A risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique ...
  2. European Union - EU

    A group of European countries that participates in the world economy as one economic unit and operates under one official ...
  3. Sell-Off

    The rapid selling of securities, such as stocks, bonds and commodities. The increase in supply leads to a decline in the ...
  4. Brazil, Russia, India And China - BRIC

    An acronym for the economies of Brazil, Russia, India and China combined. It has been speculated that by 2050 these four ...
  5. Brexit

    The Brexit, an abbreviation of "British exit" that mirrors the term Grexit, refers to the possibility of Britain's withdrawal ...
  6. Underweight

    1. A situation where a portfolio does not hold a sufficient amount of a particular security when compared to the security's ...
Trading Center