Macro 13- Supply side policy

• Supply side policy

  policies designed to increase the productive capacity of the economy shifting LRAS to the right

  Improves macroeconomic objectives
• Pros of supply side policies

  deals with structural unemployment since labour market can be improved with training and education
• Cons of supply side policies

  Time lags

  unequal distribution of wealth

  costly

  output gaps

  no guarantee of success

  negative stakeholder impacts
• Market based supply side policies

  1. increasing incentives- reduction in income and corporation tax
  2. promoting competition- deregulating and privatising public sector
  3. reform labour market- reducing NMW and reducing trade union power
• Interventionist based supply side policies

  • promote competition- making stricter policies that reduce monopoly power
  • reform labour market- subsidising relocation of workers and increasing job availability
  • Improvements in skills and quality of labour force- subsidising education and training
  • infrastructure improvements