Energy and labour reform: Evidence from Iran
AbstractTaking Iran as a case study, we analyze the effects of eliminating crude oil and fuel subsidies on the labour market using two alternative policy options. The first redistributes additional revenue as extra income to households, while the second directs revenue into increased investment. We investigate immediate versus gradual subsidy removal, focusing on the transition dynamics at play. A purpose-built dynamic Computable General Equilibrium model is deployed with a unique Social Accounting Matrix of Iran. It is shown that rebating the extra revenue to households would adversely affect the labour market. Industries and employment contract due to the Dutch Disease effect and the more expensive fuel inputs. Channeling extra revenue into investment, however, considerably improves the labour market's fortunes in the long run via increased capital accumulation and shifts in industrial composition. Gradual subsidy removal allows for a smoother transition that minimizes short-run costs in the labour market.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Policy Modeling.
Volume (Year): 34 (2012)
Issue (Month): 3 ()
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Web page: http://www.elsevier.com/locate/inca/505735
Unemployment; Oil; Energy; CGE; Subsidies; Iran;
Find related papers by JEL classification:
- C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
- E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
- H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
- J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
- O53 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East
- Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
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