subsidize

Subsidize means to support financially by paying part of the cost of a good, service, or activity, typically from public funds. Subsidies can be provided directly to producers or consumers, or indirectly through instruments such as tax credits, price supports, loan guarantees, grants, subsidies in kind, or preferential procurement. They may target a sector, a specific project, or the general public.

Subsidies are used to reduce prices for consumers, stabilize incomes, promote investment in strategic or priority sectors, foster research and development, or advance social objectives such as housing, education, or healthcare. They can aim to correct market failures or address externalities, or to pursue regional, developmental, or environmental goals. The design and scale of subsidies vary widely across countries and programs.

Economic effects of subsidies are debated. They can improve access and welfare in certain contexts, but may distort prices, misallocate resources, and create dependencies or windfall gains. Subsidies can raise government costs and strain fiscal space, and they may distort competition or affect trade. Effective policy design—targeting, duration, sunset clauses, transparency, and rigorous impact evaluation—helps mitigate adverse effects.

Policy and legal context: Subsidies are subject to governance norms and disclosure requirements. International rules, such as those of the World Trade Organization, regulate certain types of subsidies that affect trade, and many jurisdictions impose state aid rules to govern subsidies to firms.

Examples include agricultural subsidies, energy subsidies, housing subsidies, and education or student subsidies.