Agricultural Economics and Development

Agricultural Economics and Development

The effects of energy subsidies targeted on the welfare of producers and rice consumers in Iran: Application of price endogenous mathematical programming model

Document Type : Original Article

Authors
M. Bagheri 1
S. H. Mousavi 2
1 Assistant Professor, Department of Agricultural Economics and Development, Payame Noor University of Guilan, Rasht, Iran
2 Associate Professor, Department of Agricultural Economics,Tarbiat Modares University, Tehran, Iran
10.30490/aead.2020.252526.0
Abstract
Energy subsidy reform effects on various social groups (producers and consumers) have always been a challenging dilemma for policymakers and researchers in agricultural economics. This study aimed at investigating and quantifying the impacts of targeted energy subsidies on the well-being of consumers and producers of rice in Iran using price endogenous mathematical programming model. The results showed that the targeted subsidies for fuel as a very influential factor in the production and marketing of rice could cause a slight decrease in production as well as increases in prices; then, a new equilibrium in the market would be created for this product, so that the social welfare might be reduced due to a reduced consumers’ welfare while indicating a slight increase in the welfare of rice producers. Therefore, the implementation of this policy might create a recession in the rice market. Accordingly, the investment in production technology through the use of improved and high yield seeds and the increase in consumption efficiency by reducing the rice waste were recommended for increasing the production and supply of the products.
Keywords
Targeted Energy Subsidies
Welfare of Producers and Consumers
Rice

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