- The benefits of supply-side policies far outweigh the negatives, yet many economies fail to fully develop their supply-side policies due to a process of constant political change - and an associated change in government priorities
An Evaluation of Market Based Supply-side Policies
Advantages
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Disadvantages
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- Improved resource allocation: increasing the productive capacity of an economy requires more efficient use of its resources, including labour
- No burden on government budget: with an emphasis on freeing up markets and allowing market forces to drive efficiency and resource allocation, there is no requirement for government spending
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- Equity issues: E.g. the distribution of income worsens as labour market reforms and wage policies lower worker's wages
- Time lags: there are significant time lags between expenditure and seeing the benefits
- Vested interests: can result in less effective outcomes e.g. there are many examples of privatisation occurring in such a way that the government's preferred bidders obtained an asset at a knock down price
- Environmental impact: large infrastructure projects almost always have some negative externalities associated with their creation e.g. dam in a gorge to create a hydro electric dam damages the natural environment and eco system
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An Evaluation of Interventionist Supply-side Policies
Advantages
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Disadvantages
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- Direct support of sectors important for growth: Subsidies to specific industries increase the rate of growth of an economy
- Direct support reduces unemployment
- Direct support can increase the level of exports
- Improvements in living standards: Improvements in Infrastructure can raise the quality of life for all citizens
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- Costs: they are expensive to implement and are paid for using tax revenue - or increased government borrowing
- Time lags: due to the long-term nature, changes in government often result in changes to budgets and scope of projects and the end result may be less effective than it could have been
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