Impacts of Chemical Fertilizers\' Subsidy Removal on Producers and Consumers Welfare: The Case Study of Rice

Abstract
The high share of subsidies on inputs such as chemical fertilizers in the Iran and the negative effects of these policies on variables such as yield and government expenditures has been caused the decision to removal these types of subsidies. The rice is one of the products that have been affected following the application of this policy. In this study, the spatial equilibrium model was used to investigate the effects of government policies in the field of targeted subsidies for fertilizers such as nitrogen, phosphate and potassium on the rice producers and consumers welfare in different regions of Iran. Results of this study show that the removal of fertilizers subsidies had various effects in different regions, and this is more noticeable changes in the major areas of this production. In general, the removal of essential inputs subsidies such as nitrogen, mainly increased rice producers and consumers welfare, so that producer and consumer total welfare have been increased about 1.83 and 4.56% respectively. While the removal of phosphate and potassium fertilizers subsidies despite its positive impact on the producers welfare in some areas, have been caused decrease in Iranian producer total welfare about 0.188 and 0.191%respectively and also decrease in consumer total welfare about 0.46 and 0.47% respectively.
JEL Classification: C61, D60, Q18
Keywords:
Removal of Subsidies, Welfare Effects, Chemical Fertilizer, Rice, Spatial Equilibrium Model