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A general equilibrium analysis of the inflationary impact of energy subsidies reform in Iran

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  • Hossein Mirshojaeian Hosseini
  • Shinji Kaneko

    (Graduate School for International Development and Cooperation, Hiroshima University)

Abstract

Iran has suffered ever-increasing domestic energy consumption mostly due to its price controlling policy. If the trend continues, it will become a pure importer in the following decades. To avoid that unlucky fate, Iran started the energy subsidies reform on December 2010. It increased domestic energy and agricultural prices up to 20 times, making it the first major oil-exporting country to reduce substantially implicit energy subsidies. The paper studies the inflationary impact of the energy subsidies reform on different non-energy sectors and urban and rural households in Iran. For this purpose, the input-output price model of Iran is made and energy cross-price elasticities of non-energy sectors are derived. The results evidence the tremendous effects of the complete reform on the production and consumption prices.

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File URL: http://ir.lib.hiroshima-u.ac.jp/metadb/up/ZZT00001/IDEC-DP2_02-8.pdf
File Function: First version, 2012
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Bibliographic Info

Paper provided by Hiroshima University, Graduate School for International Development and Cooperation (IDEC) in its series IDEC DP2 Series with number 2-8.

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Length: 34 pages
Date of creation: Feb 2012
Date of revision:
Handle: RePEc:hir:idecdp:2-8

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Web page: http://www.hiroshima-u.ac.jp/en/idec/
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Keywords: Energy subsidies reform; Production and consumption prices; Iran; Input-output price model; Decomposition;

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  1. Llop, Maria, 2008. "Economic impact of alternative water policy scenarios in the Spanish production system: An input-output analysis," Ecological Economics, Elsevier, Elsevier, vol. 68(1-2), pages 288-294, December.
  2. Birol, F & Aleagha, AV & Ferroukhi, R, 1995. "The economic impact of subsidy phase out in oil exporting developing countries: a case study of Algeria, Iran and Nigeria," Energy Policy, Elsevier, Elsevier, vol. 23(3), pages 209-215, March.
  3. Larsen, Bjorn & Shah, Anwar & DEC, 1992. "World fossil fuel subsidies and global carbon emissions," Policy Research Working Paper Series 1002, The World Bank.
  4. Robert Gillingham & David Locke Newhouse & David Coady & Kangni Kpodar & Moataz El-Said & Paulo A. Medas, 2006. "The Magnitude and Distribution of Fuel Subsidies," IMF Working Papers 06/247, International Monetary Fund.
  5. Jesper Jensen & David Tarr, 2003. "Trade, Exchange Rate, and Energy Pricing Reform in Iran: Potentially Large Efficiency Effects and Gains to the Poor," Review of Development Economics, Wiley Blackwell, Wiley Blackwell, vol. 7(4), pages 543-562, November.
  6. Hesham AlShehabi, Omar, 2012. "Energy and labour reform: Evidence from Iran," Journal of Policy Modeling, Elsevier, Elsevier, vol. 34(3), pages 441-459.
  7. Suzuki, Kengo & Uchiyama, Yohji, 2010. "Quantifying the risk of an increase in the prices of non-energy products by combining the portfolio and input-output approaches," Energy Policy, Elsevier, Elsevier, vol. 38(10), pages 5867-5877, October.
  8. Llop, Maria & PiƩ, Laia, 2008. "Input-output analysis of alternative policies implemented on the energy activities: An application for Catalonia," Energy Policy, Elsevier, Elsevier, vol. 36(5), pages 1642-1648, May.
  9. Liu, Hong-Tao & Guo, Ju-E & Qian, Dong & Xi, You-Min, 2009. "Comprehensive evaluation of household indirect energy consumption and impacts of alternative energy policies in China by input-output analysis," Energy Policy, Elsevier, Elsevier, vol. 37(8), pages 3194-3204, August.
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