What supply-side policies are
- Supply-side policies aim to increase the productive capacity of the economy (its ability to produce), making it more efficient and competitive in the long run.
Examples
- Education and training: raising workers' skills (human capital) improves productivity.
- Infrastructure: better transport and broadband make it easier for firms to operate.
- Lower taxes on income and profits: encourage work, enterprise and investment.
- Deregulation: removing unnecessary rules to increase competition.
- Privatisation: selling state-owned firms to the private sector to make them more efficient.
- Labour market reforms: such as making it easier for people to move for work.
Evaluation
- Advantages: can increase growth without causing inflation, and reduce structural unemployment.
- Disadvantages: they take a long time to work, can be expensive, and some (like deregulation or tax cuts for the rich) can increase inequality or harm workers' rights.
Key terms
- Supply-side policies
- Policies to increase the economy's productive capacity.
- Productive capacity
- The maximum an economy can produce.
- Human capital
- The skills and knowledge of workers.
- Infrastructure
- Basic facilities such as roads, railways and broadband.
- Deregulation
- Removing rules to increase competition.
- Privatisation
- Selling state-owned firms to the private sector.