5.4.2—Supply-side objectives

Supply-side policy can support long-run growth by raising potential output. It may also lower structural unemployment, reduce cost pressure and improve competitiveness, although effects can conflict or arrive slowly.

The objective depends on the instrument and the constraint. More skills may improve employability; infrastructure may reduce firms’ costs; stronger competition may lower prices but create adjustment costs for some workers.

If training lets firms fill vacancies with local workers, potential output rises and structural unemployment may fall. If the training is unrelated to available jobs, the measured spending need not deliver those outcomes.

A rightward LRAS shift does not guarantee equal incomes or zero inflation, and short-run implementation costs may be contractionary.