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Assessing effects of alternative food subsidy reform in Iran

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  • Karami, Ayatollah
  • Esmaeili, Abdoulkarim
  • Najafi, Bahadin

Abstract

The food subsidy programs and its long-term effects have emerged as major developmental issues in many developing countries. The programs might increase social welfare to individuals but they pose both an unnecessary burden on the public budget and are economically inefficient because their benefits are often not received by the poor. Furthermore, due to improper targeting, a large part of food subsidies is “leaked” to high-income people. This study aims to investigate the effects of alternative food subsidy reforms on households’ welfare and government expenditure in Iran. For this purpose, computable general equilibrium (CGE) model was applied. The scenarios consist of, gradual omission of subsidy during 3 and 5 years period and instant complete omission of food subsidy. The results indicated that in these polices government expenditure decreases by 5.8%, and resulting to decrease in import and export of agricultural and non-agricultural goods, but decreases in import exceeds the export reduction. In addition, results showed that the welfare of households’ decreases for all scenarios, since decreases in urban households is greater than as rural households. Furthermore, between quintiles groups, decreases among welfare in high income quintiles are greater than the lower income ones groups. Based on the result, it is recommended to implement the food subsidy reform in 5 years period and targeted to lower income segments of the society. The most important policy implication of this study is the reallocation of food subsidy gradually among lower income quintiles groups.

Suggested Citation

  • Karami, Ayatollah & Esmaeili, Abdoulkarim & Najafi, Bahadin, 2012. "Assessing effects of alternative food subsidy reform in Iran," Journal of Policy Modeling, Elsevier, vol. 34(5), pages 788-799.
    • Handle: RePEc:eee:jpolmo:v:34:y:2012:i:5:p:788-799
    DOI: 10.1016/j.jpolmod.2011.08.002
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    References listed on IDEAS

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    Cited by:

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    2. Jha, Raghbendra & Gaiha, Raghav & Pandey, Manoj K. & Kaicker, Nidhi, 2013. "Food subsidy, income transfer and the poor: A comparative analysis of the public distribution system in India's states," Journal of Policy Modeling, Elsevier, vol. 35(6), pages 887-908.
    3. Beghin, John & Meade, Birgit & Rosen, Stacey, 2017. "A food demand framework for International Food Security Assessment," Journal of Policy Modeling, Elsevier, vol. 39(5), pages 827-842.
    4. Mardani Najafabadi, Mostafa & Ziaee, Saman & Nikouei, Alireza & Ahmadpour Borazjani, Mahmoud, 2019. "Mathematical programming model (MMP) for optimization of regional cropping patterns decisions: A case study," Agricultural Systems, Elsevier, vol. 173(C), pages 218-232.
    5. 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.
    6. Haqiqi, Iman & Yasharel, Sepideh, 2018. "Removing Fossil Fuel Subsidies to Help the Poor," MPRA Paper 95907, University Library of Munich, Germany.
    7. Herbert W. V. Hasudungan & Sulthon S. Sabaruddin, 2016. "The Impact of Fiscal Reform on Indonesian Macroeconomy: A CGE Framework," Central European Journal of Economic Modelling and Econometrics, Central European Journal of Economic Modelling and Econometrics, vol. 8(3), pages 181-202, September.
    8. Liu, Jing Jing & Salleh, Norlida Hanim Mohd & Nor, Nor Ghani Md, 2024. "The economy-wide impact of cooking oil subsidy reforms and compensation to the oil palm industry," Journal of Policy Modeling, Elsevier, vol. 46(6), pages 1228-1242.
    9. Jing Jing Liu & Norlida Hanim Mohd Salleh & Hasimah Sapiri & Norazura Ahmad, 2025. "Causality Analysis of Cooking Oil Subsidy Reform in Malaysia: A Conceptual Framework from System Dynamic Approach," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 9(2), pages 3844-3851, February.

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    More about this item

    Keywords

    Food subsidy; Iran; CGE model; Welfare;
    All these keywords.

    JEL classification:

    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • P36 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - Consumer Economics; Health; Education and Training; Welfare, Income, Wealth, and Poverty

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