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Economic Definition of subsidy. Offline Version: PDF. Term subsidy Definition: A payment from government to individuals or businesses without any expectations of production. The best way of thinking about a subsidy is as a negative tax.
A benefit given by the government to groups or individuals usually in the form of a cash payment or tax reduction. The subsidy is usually given to remove some type of burden and is often considered to be in the interest of the public. Politics play an important part in subsidization.