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Trade, Exchange Rate, and Energy Pricing Reform in Iran: Potentially Large Efficiency Effects and Gains to the Poor

In: APPLIED TRADE POLICY MODELING IN 16 COUNTRIES Insights and Impacts from World Bank CGE Based Projects

Author

Listed:
  • Jesper Jensen
  • David Tarr

Abstract

Iran is committed to substantial trade and market reform in its Third Five Year Development Plan. It started, however, with nontariff barriers on all products, a dual exchange rate regime with the market rate more than four times the official rate, and domestic energy product subsidies of about 90%. The authors develop a multisector computable general-equilibrium model with ten rural and ten urban households to analyze the various reforms, separately and together. Reflecting the large initial distortions, they find that the combined reforms could generate large welfare gains equal to about 50% of aggregate consumer income. Moreover, the results show that well-intentioned policies of commodity subsidies for the poor can have perverse effects. Even nontargeted direct income payments to all households (not just the poor) would enormously and progressively increase the incomes of the poor compared to the status quo.

Suggested Citation

  • 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..
    • Handle: RePEc:wsi:wschap:9789814551434_0013
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    References listed on IDEAS

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    1. Barzel, Yoram, 1974. "A Theory of Rationing by Waiting," Journal of Law and Economics, University of Chicago Press, vol. 17(1), pages 73-95, April.
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    3. Jaime De Melo & David Tarr, 2017. "Industrial Policy In The Presence Of Wage Distortions: The Case Of The Us Auto And Steel Industries," World Scientific Book Chapters, in: Trade Policies for Development and Transition, chapter 24, pages 575-593, World Scientific Publishing Co. Pte. Ltd..
    4. Glenn W. Harrison & Thomas F. Rutherford & David G. Tarr, 2014. "Trade liberalization, poverty and efficient equity," World Scientific Book Chapters, in: APPLIED TRADE POLICY MODELING IN 16 COUNTRIES Insights and Impacts from World Bank CGE Based Projects, chapter 11, pages 255-286, World Scientific Publishing Co. Pte. Ltd..
    5. Thomas F. Rutherford & David G. Tarr, 2017. "Trade liberalization, product variety and growth in a small open economy: a quantitative assessment," World Scientific Book Chapters, in: Trade Policies for Development and Transition, chapter 17, pages 389-414, World Scientific Publishing Co. Pte. Ltd..
    6. Glenn W. Harrison & Thomas F. Rutherford & David G. Tarr, 2014. "Economic implications for Turkey of a Customs Union with the European Union," World Scientific Book Chapters, in: APPLIED TRADE POLICY MODELING IN 16 COUNTRIES Insights and Impacts from World Bank CGE Based Projects, chapter 16, pages 395-404, World Scientific Publishing Co. Pte. Ltd..
    7. World Bank, 2001. "Trade and Foreign Exchange Policies in Iran : Reform Agenda, Economic Implications and Impact on the Poor," World Bank Publications - Reports 15478, The World Bank Group.
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    More about this item

    Keywords

    International Trade Policy; Developing Countries; Computable General Equilibrium; World Bank; Regional Trade Policy; Services Liberalization; Foreign Direct Investment; Trade and Poverty;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General

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