IDEAS home Printed from https://ideas.repec.org/a/eee/jpolmo/v34y2012i3p441-459.html
   My bibliography  Save this article

Energy and labour reform: Evidence from Iran

Author

Listed:
  • Hesham AlShehabi, Omar

Abstract

Taking 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.

Suggested Citation

  • Hesham AlShehabi, Omar, 2012. "Energy and labour reform: Evidence from Iran," Journal of Policy Modeling, Elsevier, vol. 34(3), pages 441-459.
  • Handle: RePEc:eee:jpolmo:v:34:y:2012:i:3:p:441-459
    DOI: 10.1016/j.jpolmod.2011.09.003
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0161893811001086
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Thomas F. Rutherford & E. Elisabet Rutstrom & David Tarr, 2014. "Morocco's free trade agreement with the EU: A quantitative assessment," World Scientific Book Chapters,in: APPLIED TRADE POLICY MODELING IN 16 COUNTRIES Insights and Impacts from World Bank CGE Based Projects, chapter 17, pages 405-437 World Scientific Publishing Co. Pte. Ltd..
    2. Agenor, Pierre-Richard & Nabli, Mustapha K. & Yousef, Tarik & Jensen, Henning Tarp, 2007. "Labor market reforms, growth, and unemployment in labor-exporting countries in the Middle East and North Africa," Journal of Policy Modeling, Elsevier, vol. 29(2), pages 277-309.
    3. Chontanawat, Jaruwan & Hunt, Lester C. & Pierse, Richard, 2008. "Does energy consumption cause economic growth?: Evidence from a systematic study of over 100 countries," Journal of Policy Modeling, Elsevier, vol. 30(2), pages 209-220.
    4. Hope, Einar & Singh, Balbir, 1995. "Energy price increases in developing countries : case studies of Colombia, Ghana, Indonesia, Malaysia, Turkey, and Zimbabwe," Policy Research Working Paper Series 1442, The World Bank.
    5. Jesper Jensen & David Tarr, 2014. "Trade, Exchange Rate, and Energy Pricing Reform in Iran: Potentially Large Efficiency Effects and Gains to the Poor," World Scientific Book Chapters,in: APPLIED TRADE POLICY MODELING IN 16 COUNTRIES Insights and Impacts from World Bank CGE Based Projects, chapter 13, pages 307-326 World Scientific Publishing Co. Pte. Ltd..
    6. Bergman, Lars, 1988. "Energy Policy Modeling: A survey of general equilibrium approaches," Journal of Policy Modeling, Elsevier, vol. 10(3), pages 377-399.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Breisinger, Clemens & Diao, Xinshen & Wiebelt, Manfred, 2012. "Can oil-led growth and structural change go hand in hand in Ghana? A multi-sector intertemporal general equilibrium assessment," Kiel Working Papers 1784, Kiel Institute for the World Economy (IfW).
    2. AlShehabi, Omar Hesham, 2013. "Modelling energy and labour linkages: A CGE approach with an application to Iran," Economic Modelling, Elsevier, vol. 35(C), pages 88-98.
    3. Farajzadeh, Zakariya & Zhu, Xueqin & Bakhshoodeh, Mohammad, 2017. "Trade reform in Iran for accession to the World Trade Organization: Analysis of welfare and environmental impacts," Economic Modelling, Elsevier, vol. 63(C), pages 75-85.
    4. Hossein Mirshojaeian Hosseini & Shinji Kaneko, 2012. "A general equilibrium analysis of the inflationary impact of energy subsidies reform in Iran," IDEC DP2 Series 2-8, Hiroshima University, Graduate School for International Development and Cooperation (IDEC).
    5. Breisinger, Clemens & Diao, Xinshen & Wiebelt, Manfred, 2014. "Can oil-led growth and structural change go hand in hand in Ghana?," Journal of Policy Modeling, Elsevier, vol. 36(3), pages 507-523.
    6. Scobie, Michelle, 2017. "Fossil fuel reform in developing states: The case of Trinidad and Tobago, a petroleum producing small Island developing State," Energy Policy, Elsevier, vol. 104(C), pages 265-273.

    More about this item

    Keywords

    Unemployment; Oil; Energy; CGE; Subsidies; Iran;

    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; Aggregate Human Capital; Aggregate Labor Productivity
    • 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, Innovation, 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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jpolmo:v:34:y:2012:i:3:p:441-459. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu). General contact details of provider: http://www.elsevier.com/locate/inca/505735 .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.