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Subsidies - Research Paper Example

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Subsidies are financial assistance provided by the government of a country to some of its domestic firms or a specific industry or sector (Schaffer, Agusti & Earle 374). The governments of different countries allocate subsidies to its industries with a variety of objectives both…
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Subsidies
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Download file to see previous pages In particular, subsidies are provided to those industries or sectors which are lagging behind the other sectors in the economy in terms of performance or are not being able to perform up the expected level. In this paper we shall focus on the subsidies provided by the governments of the less developed countries (LDCs) and developing countries. In these countries subsidies are provided by the government on the trading of different goods and services, and can be categorized as energy or fuel subsidies, agricultural subsidies and educational subsidies. However, the World Bank and the IMF has stated that subsidies act as barriers to investment in the developing country by foreign and international companies. This in turn proves unbeneficial for the country’s long term development. It is in the country’s own interest towards its development that the government should abolish subsidies and promote perfect competition. This paper aims at examining the relationship between subsidies and economic growth in the context of developing countries.
The research question addressed by this research paper can be described well with the help of some small questions. They are; do subsidies result in increasing the overall economic development and growth in the developing countries? What is the importance of the subsidies for the developing countries? How do subsidies impact the government spending and federal budget? How do subsidies influence the operations of the international companies in these developing countries? In order to answer these questions the relationship between subsidies provided by governments and economic development of the developing countries will be examined.
The subject about impact of subsidies on the developing countries is quite researched upon. Before going into the details of my research work I shall review some of the existing literature on this topic in this section. Peacock elaborates in his paper the role of subsidies is important ...Download file to see next pagesRead More
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