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Impacts of World Prices Transmission to Domestic Markets and Welfare of Marginal Households: An Empirical Application to Rice in Iran

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  • Mohammad Bakhshoodeh

    () (Department of Agricultural Economics,College of Agriculture, Shiraz University, Iran)

Abstract

This paper attempts to assess the degree by which Iranian households have responded to the change in price of imported rice resulting from the exchange-rate unification. In addition, it attempts to examine to which extent the policy has affected the economic welfare of various household income groups, particularly the poor. Using samples of 2472 rural households and 2900 urban households selected from the national expenditure survey data of 2002 and 2003, Armington and pass-through elasticities are calculated as two measures of substitutability, and are discussed separately for each household group in both rural and urban areas. The findings indicate that domestic rice prices are associated differently with imported rice prices by different households. However, a price increase in imported rice, which is mainly consumed by the poor, worsens their position much more severely than rich people who prefer domestic rice. In general, the findings of this study contribute to the understanding of how price changes resulting from trade liberalization may affect various groups of households and the ways they respond to such changes in prices.

Suggested Citation

  • Mohammad Bakhshoodeh, 2008. "Impacts of World Prices Transmission to Domestic Markets and Welfare of Marginal Households: An Empirical Application to Rice in Iran," Working Papers 399, Economic Research Forum, revised 03 Jan 2008.
  • Handle: RePEc:erg:wpaper:399
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    References listed on IDEAS

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    1. Seshan, Ganesh, 2005. "The impact of trade liberalization on household welfare in vietnam," Policy Research Working Paper Series 3541, The World Bank.
    2. Jones, Eugene & Chern, Wen S. & Mustiful, Barry K., 1994. "Are Lower-Income Shoppers As Price Sensitive As Higher-Income Ones?: A Look At Breakfast Cereals," Journal of Food Distribution Research, Food Distribution Research Society, vol. 25(1), February.
    3. John Baffes & Bruce Gardner, 2003. "The transmission of world commodity prices to domestic markets under policy reforms in developing countries," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 6(3), pages 159-180.
    4. Deaton,Angus & Muellbauer,John, 1980. "Economics and Consumer Behavior," Cambridge Books, Cambridge University Press, number 9780521296762, May.
    5. L. Alan Winters, 2002. "Trade Liberalisation and Poverty: What are the Links?," The World Economy, Wiley Blackwell, vol. 25(9), pages 1339-1367, September.
    6. John L. Park & Rodney B. Holcomb & Kellie Curry Raper & Oral Capps, 1996. "A Demand Systems Analysis of Food Commodities by U.S. Households Segmented by Income," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 78(2), pages 290-300.
    7. M. Bakhshoodeh & K. J. Thomson, 2006. "Social welfare effects of removing multiple exchange rates: evidence from the rice trade in Iran," Agricultural Economics, International Association of Agricultural Economists, vol. 34(1), pages 17-23, January.
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