Examples of supply-side policies

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  • Created by: izzy
  • Created on: 12-06-13 19:07

Industrial policy measures

  • Privatisation. The sale or transfer of assets such as nationalised industries from the public sector to the private sector.
  • Marketisation (or commercialisation). Shifting economic activity from non-market provision (financed by taxation) to commercial or market provision for which the customer pays.
  • Deregulation. The removal of previously imposed regulations in order to promote competition. It removes barriers to market entry to make markets contestable, and gets rid of unnecessary 'red tape' or bureaucracy, which had increased firms' costs of production.
  • Internal markets. In the National Health Service and education, where the state continues to be a major producer and provider of services, internal markets can be introduced to provide a form of commercial discipline and to improve efficiency. In an internal market, which is a substitute for privatisation, the taxpayer continues to finance hospitals and schools, but hospitals and schools 'earn' the money according to how many patients and pupils they attracy.

Labour market measures

  • Lower rates of income tax. Reducing marginal rates of income tax to create labour markets incentives, and raising tax thresholds or personal tax allowances to remove the low-paid from the tax net.
  • Reducing state welfare benefits relative to average earnings. Lower benefit levels create incentives to choose low-paid employment in preference to claiming unemployment-related benefits. In addition, welfare benefits can be made more difficult to claim, and available only to claimants genuinely looking for work. Making benefits less attractive may also reduce the unemployment trap.
  • Changing employment law to reduce the




Concise revision notes on specific supply side policies. Could be used to create mind map, flash cards or to highlight further revision needs.

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