Analyzing the Welfare Effects of Green Subsidy Policy on Producers in Iran Using a Computable General Equilibrium Model (on the Way to WTO Accession)

Document Type : Original Article

Authors

1 Corresponding Author and PhD Student in Agricultural Economics, Payame Noor University, Tehran, Iran

2 Associate Professor, Agricultural Economics, Payame Noor University, Tehran, Iran

3 Associate Professor, Agricultural Economics, Payame Noor University, Tehran, Iran.

4 Assistant Professor, Agricultural Economics, Payame Noor University, Tehran, Iran.

Abstract

One of the most important economic policies in most countries is to support producers or consumers through subsidies; and green subsidies are designed for farmers to achieve the prosperity of business and industry in the agricultural sector. The present study was conducted to investigate the effects of Iran's accession to the World Trade Organization (WTO) by calculating the effects of green subsidy application on farmers' welfare using supply function estimation within a Computable General Equilibrium (CGE) model. Thus, the simulated green subsidy policy in the agricultural sector was designed through 20%, 50% and 100% scenarios and also the model calibration was done using the social accounting matrix of 2011 and the baseline scenario (zero percent of green subsidy applications). In addition, GAMS software was used to analyze the research information. The results showed that during Iran's accession to the World Trade Organization, followed by the implementation of the simulated green subsidy policy, production in the agricultural sector would increase and the prices would decrease while production in industry and services would decrease and the prices would increase. In general, the results of the observed changes indicated an increase in producer welfare in all sectors, with the difference that in the agricultural sector, these changes would be much greater.

Keywords

References

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