OVER-subsidizing or UNDER-subsidizing(With good evaluation)

Is OVERSUBSIDIZING or UNDERSUBSIDIZING more problematic?

I feel that undersubsidizing is more problematic as if firms are undersubsizied, they will not have enough capital to start their own enterprise. Hence, this will lead to less suppliers in the market and with lesser output, less revenues will be collected, and in the long run, the country's economy might be stagnant and not be able to compete against other upcoming countries like Vietnam. Also the country's standard of living might be affected and result in more unsatisfaction in the people. Hence, undersubdizing firms can lead to 2 major problems: economical and social.

Oversubsidizing on the other hand, may allow firms to start their enterprise with lesser usage of capital, and hence with the extra capital on hand, they can easily expand their businesses and tap on overseas markets, earning foreign as well as local capital. With more enterprises and higher output, a country will be able to earn higher revenue, leading to higher standard of living. Services will thus be top-notch as well to compete against rival countries, hence attracting foreigners' money, increasing revenue for the country as well. Even though higher taxes will have to be paid by citizens, most of them will not mind as given the economic status of the country, they will more likely earn back their money through bonuses and other payouts.

Therefore, undersubsizing is more problematic.

-GERALD :D:D:D:D:D