Social Implications of Subsidies on Necessities
Author: Efraim Sadka
March 10, 1985
Expenditure on subsidized commodities constitutes more than a quarter of the total monthly expenditure of the lowest decile of the population. The highest decile spends only 7% of its current outlays on these commodities.
As a consequence, subsidies on necessities are an efficient instrument reducing the economic burden on poor families in Israel.
This study also examines the trade-off between subsidies and transfer payments. Some people object to subsidies, as these must by their very nature aid wealthy families, as well. This line of thinking prefers the method of transfer payments, which can be channeled directly to the needy. However, this method as serious drawbacks, as well.
To sum up, it would appear that each of the two methods has its advantages and drawbacks, and that the best policy requires a proper combination of both frameworks – subsidies and direct transfer payments.
This paper appears as a chapter in the Center’s annual publication, Israel’s Outlays for Human Services 1984, and is available upon request.