Subsidies Research Paper Example | Topics and Well Written Essays - 2000 words - 1

Subsidies - Research Paper Example This paper aims at examining the relationship between subsidies and economic growth in the context of developing countries. 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 in direct and indirect forms. However, the central purpose of levying a subsidy is to keep the price below the level normally determined by the market forces in the sector in which the subsidy is provided and accelerate the course of development in the entire nation (Moltke, McKee & Morgan 23). 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. 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 in the overall welfare of the economy (Peocock 323-335). Although elimination of subsidies on necessary goods, such as agricultural products, medicines and other items related to health sector and the petroleum products, is a key policy prescription for the developing countries by the World Bank, no persuasive theory has been developed supporting this policy. Amegashie states in this context that the governments of the developing countries should exercise caution in following a process of removing subsidies since it might give rise to agitation on part of the citizens (Amegashie 7-15). Thus, the research will try to explore the effects and side effects of such system. The study employs secondary sources. The research will employ Qualitative method and