The subsidization of seaports: an alternative approach

This paper examines seaport subsidies not on the basis of those which already exist and the arguments put forward in their support, but from a more theoretical point of view which looks at why one might wish to have subsidies and the types of subsidy which might result. It reviews three situations in which it might be desirable to subsidize a seaport: (i) when the port accounting system leads to investment and output decisions which differ from the social optimum, (ii) when the port is unable to adopt certain pricing alternatives because they are administratively inconvenient, or (iii) when subsidization will increase the flow of resources into the national economy so that there are important macro-economic considerations The subsidies themselves can also be classified into three main groups – sporadic, persistent, and predatory – each being appropriate only in specific and well defined circumstances.