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Assessment of Subsidies on Agricultural Production in Iran

21 February 2020
25 March 2020
15 April 2020

Hossein Badihbarzin, Zahra Ghafari, Somayeh Mirshekar, Ebrahym Dahmardeh

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Subsidy is one of the means of government support that is used to support various economic sectors. Today subsidy for different political and economic reasons in several countries, such as Iran, is common. This study has examined the effects of changes in agricultural subsidies on production and export of agricultural products. For this purpose, a computational model of general equilibrium (CGE) for the year 2011 was used in social accounting matrix form in 2001 as the statistical basis. For the extraction and transportation of nonlinear programming model "mixed complementary problem" (MCP) was used. Social Accounting Matrix was divided into six main sections that are agriculture, oil and gas, textiles, energy, industry and services and also welfare, investment, exports and imports sectors, and a consumer sector. To examine the effect of subsidy, the amount of agricultural subsidies was reduced in four steps and its effects on the endogenous variables were examined. Results showed that reducing agricultural subsidies, decreases the level of production in this part and increases prices and this causes the real exchange rate deviations from equilibrium and stops the exports of this section. Also, the unemployment rate increases and welfare decreases.

Keywords: social accounting matrix, computational general equilibrium, agricultural subsidies.


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