Question

A healthy population is needed for the continual sustainability of our economies. There are private businesses offering medical to assist in the maintenance of good health, however the cost can be exorbitant. Justify a policy decision by a Caribbean Government to provide subsidies/free treatment to different groups within the country, especially in the area of non-communicable diseases. Determine the impact this could have on the various aspects of sustainable economic development. (Use the link below to arouse your internal thoughts.

Answer 1

-- A subsidy (also known as a subvention) is a form of financial assistance paid to an individual, a business or an economic sector in order to achieve certain policy objectives. For example, a subsidy can be used to support a service that cannot recover its full costs (e.g. through tariffs), which is a common problem in the water and sanitation sector. Subsidies may also be given to encourage activities that would otherwise not take place, e.g. a more sustainable sanitation technology. Subsides in developing countries flow almost exclusively from government, or via government in the case of official development assistance, and sometimes through international or national non-governmental organisations (EVANS et al. 2009).

Impact :---

*Advantages:-

If well targeted, can have very positive effect

Can help to balance market disadvantages for certain target groups

Addresses access problems directly and may be better targeted

Uses existing tariff collection and payment system

*Disadvantages:-

Lack of financial sustainability, if there are not sufficient public funds to support it

Subsidies may not increase access to poor households

Subsidies often create expectations that cannot be fulfilled in surrounding and suppress demand

The use of subsidies for construction of “standard” facilities distorts the market and suppresses innovations that might bring down costs

Subsidies aimed at helping the poorest sometimes associate a certain technology with poverty

Requesting a down payment or contribution to assess demand before a subsidy is released may exclude the poorest households

Subsidies may distort markets, and can impose large economic costs