The scope and limits of subsidies

Subsidies are a potentially powerful tool to address concerns about income redistribution when the design of tax systems is ineffective and politically too difficult to alter to achieve fairness. The ability to target subsidies also makes them a potentially effective instrument to correct market failures. Because they are relatively low-cost instruments that can be used to support a wide range of targeted political objectives, subsidies pervade almost all dimensions of our lives. The obvious subsidies are the ones that make the newspapers and generate large public protests such as agriculture, fuel, transport, but there are many more than those making the headlines. At all stages of development, subsidies are everywhere. Copyright © 2009 the brookings institution. All rights reserved.SCOPUS: ch.b