Transfer payment

Transfer payment

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In economics
Economics
Economics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...

, a transfer payment (or government transfer or simply transfer) is a redistribution of income in the market system
Market system
A market system is any systematic process enabling many market players to bid and ask: helping bidders and sellers interact and make deals. It is not just the price mechanism but the entire system of regulation, qualification, credentials, reputations and clearing that surrounds that mechanism and...

. These payments are considered to be exhaustive because they do not directly absorb resources
Factors of production
In economics, factors of production means inputs and finished goods means output. Input determines the quantity of output i.e. output depends upon input. Input is the starting point and output is the end point of production process and such input-output relationship is called a production function...

 or create output
Output (economics)
Output in economics is the "quantity of goods or services produced in a given time period, by a firm, industry, or country," whether consumed or used for further production.The concept of national output is absolutely essential in the field of macroeconomics...

. Examples of certain transfer payments include welfare (financial aid), social security
Social security
Social security is primarily a social insurance program providing social protection or protection against socially recognized conditions, including poverty, old age, disability, unemployment and others. Social security may refer to:...

, and government making subsidies
Subsidy
A subsidy is an assistance paid to a business or economic sector. Most subsidies are made by the government to producers or distributors in an industry to prevent the decline of that industry or an increase in the prices of its products or simply to encourage it to hire more labor A subsidy (also...

 for certain business
Business
A business is an organization engaged in the trade of goods, services, or both to consumers. Businesses are predominant in capitalist economies, where most of them are privately owned and administered to earn profit to increase the wealth of their owners. Businesses may also be not-for-profit...

es (firms).

See also

  • Public finance
    Public finance
    Public finance is the revenue and expenditure of public authoritiesThe purview of public finance is considered to be threefold: governmental effects on efficient allocation of resources, distribution of income, and macroeconomic stabilization.-Overview:The proper role of government provides a...

  • Generational acadfcounting
  • Government budget
    Government budget
    A government budget is a legal document that is often passed by the legislature, and approved by the chief executive-or president. For example, only certain types of revenue may be imposed and collected...

  • Transfer payments multiplier
    Transfer payments multiplier
    The Transfer payments multiplier is the multiple by whichAggregate demand will increase, when there is an increase in transfer payments...

  • Workfare
    Workfare
    Workfare is an alternative model to conventional social welfare systems. The term was first introduced by civil rights leader James Charles Evers in 1968; however, it was popularized by Richard Nixon in a televised speech August 1969...

  • Welfare state
    Welfare state
    A welfare state is a "concept of government in which the state plays a key role in the protection and promotion of the economic and social well-being of its citizens. It is based on the principles of equality of opportunity, equitable distribution of wealth, and public responsibility for those...

  • Barnett formula
    Barnett formula
    The Barnett formula is a mechanism used by The Treasury in the United Kingdom to adjust the amounts of public expenditure allocated to Northern Ireland, Scotland and Wales automatically to reflect changes in spending levels allocated to public services in England, England and Wales or Great...


Use for administrative transfer


In some federal systems the term can be also used to refer to payments from one order of to a government to another; for example in Canada
Canada
Canada is a North American country consisting of ten provinces and three territories. Located in the northern part of the continent, it extends from the Atlantic Ocean in the east to the Pacific Ocean in the west, and northward into the Arctic Ocean...

, transfer payments usually refer to a system of payments from the federal government to the provinces. Major Canadian transfer payments include equalization payments
Equalization payments
Equalization payments are cash payments made in some federal systems of government from the federal government to subnational governments with the objective of offsetting differences in available revenue or in the cost of providing services....

, the Canada Health Transfer
Canada Health Transfer
The Canada Health Transfer is the Canadian government's transfer payment program in support of the health systems of the provinces and territories of Canada...

 and the..... Canada Social Transfer
Canada Social Transfer
The Canada Social Transfer is the Canadian government's transfer payment program in support of post-secondary education, social assistance and social services, including early childhood development and early learning and childcare...

 (formerly the Canada Health and Social Transfer
Canada Health and Social Transfer
The Canada Health and Social Transfer was a system of block transfer payments from the Canadian government to provincial governments to pay for health care, post-secondary education and welfare, in place from the 1996-97 fiscal year until the 2004-05 fiscal year...

) and Territorial Formula Financing
Territorial Formula Financing
Territorial Formula Financing is an annual unconditional transfer payment from Canada's federal government to the three territorial governments of Yukon, the Northwest Territories, and Nunavut to support the provision of public services....

.
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.

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