In economics, a transfer payment (or government transfer or simply transfer) is a redistribution of income and wealth (payment) made without goods or services being received in return. These payments are considered to be non-exhaustive because they do not directly absorb resources or create output. Examples of transfer payments include welfare (financial aid), social security, and government making subsidies for certain businesses (firms).
In some federal systems the term can also be used to refer to payments from one order of a government to another. For example, in Canada transfer payments usually refer to a system of payments from the federal government to the provinces. Major Canadian transfer payments include equalization payments, the Canada Health Transfer and the Canada Social Transfer (formerly the Canada Health and Social Transfer) and Territorial Formula Financing.
In Australia, the horizontal fiscal imbalance arises because of the mismatch between the tax revenues and government expenses for the various state and territorial governments. This imbalance is addressed by a horizontal fiscal equalisation (HFE) policy overseen by the Commonwealth Grants Commission.
Transfer payments are not a part of the national income so they are cut from national income to get n.n.p. in order to arrive national income such payments are bad debts incurred by banks, payments of pensions, charity, scholarships etc. In the UK they have several transfer payments such as EMA and a job seeker's allowance.
- Public finance
- Government budget
- Transfer payments multiplier
- Welfare state
- Barnett formula
- Bishop, Matthew (2012). "Economics A–Z terms beginning with T –transfer". The Economist. Retrieved 11 July 2012.
Payments that are made without any good or service being received in return. Much PUBLIC SPENDING goes on transfers, such as pensions and WELFARE benefits. Private-sector transfers include charitable donations and prizes to lottery winners.
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