Introduction: Given the amount of agricultural imports and the significant share of these products in total agricultural imports and total imports of Iran, it can be inferred that the increase in global food prices in international markets will be transmitted to domestic markets and affect consumer spending. Therefore, an issue that has not been mentioned in economic analyses is the vulnerability of consumers in Iran as a result of the increase in global food prices and the shocks created in the food supply. Therefore, in order to protect vulnerable groups, the government should support them to offset or at least reduce the negative effects of price increases.
Materials and Methods: In the present study, in order to investigate the vulnerability of Iranian consumers, the required data of import amounts of six commodity groups/goods including cereal group (rice, wheat, corn and barley), meat group (sheep gizzard, beef and chicken meat), edible oil group (soybean oil, sunflower oil, corn oil and butter), tea, cheese and sugar were extracted and to calculate the price and income coefficients of food and as a result, the price and income elasticity (expenditure) of food, the Quadratic Almost Ideal Demand System (QUAIDS) was estimated. In the next step, the Compensatory Variation (CV) criterion was used to simulate the effects of the four defined scenarios and the welfare effects of the four scenarios were investigated. These four scenarios were defined as follows: 1) change in global food prices in the period 2000-2021, 2) increase in production costs due to the increase in the price of imported inputs in the production of the studied product groups, 3) increase in prices due to the removal of the preferred exchange, and 4) increase in the global food price index after Russian attack on Ukraine.
Results and Discussion: In scenario 1, if the price of edible oils increases by 11.9 percent and the interactions between food items are taken into account, expenditures will increase by 7.508 percent of primary expenditures and the households will be in a worse welfare situation. As shown by the results of applying the scenario of a 6.21 percent change in meat prices, as a result of this change, the CV index is equal to 5.334 percent of food consumption expenditures; and as shown by the results of applying the scenario of a 3.18 percent change in grain prices, this will lead to a change in the CV index by 2.981 percent of food consumption expenditures. The results of a 21.6 percent increase in cheese prices indicate that in this case, households are also in a worse welfare situation and their expenditures increase by 5.025 percent of total food expenditures. The results of calculating CV index for sugar indicate that as a result of a 6.40 percent increase, it will be equal to 4.630 percent of food consumption expenditures. Furthermore, the results of a 3.65 percent increase in the price of tea indicate that in this case, household welfare decreases due to the increase in price, such that their expenditures increase by 2.564 percent of total food expenditures. In Scenario 2, the average rate of change in the price of imported inputs is defined as a 12 percent increase in the cost of production of the studied goods. The results showed that due to a 12 percent increase in the cost of production of the 6 commodity groups/goods under study, expenditures would increase by 9.882 percent of primary expenditures and the households would be in a worse situation in terms of welfare. The Scenario 3 was defined as follows: First, the increase in the price of goods in June 2022 compared to May 2022 was calculated. However, since not all price changes were due to the removal of the preferred exchange rate, in this scenario, the removal of the preferential exchange rate was netted. In this way, the average increase in energy prices and labor wages was deducted from the increase in prices in June compared to May 2022. After that, it was determined that the average price changes due to the removal of the preferred exchange rate indicated a 34.9 percent increase in the prices of the concerned goods. Therefore, due to an average increase of 34.9 percent in the prices of the studied commodity groups/goods due to the removal of the preferred exchange rate, household expenditures would increase by 23.954 percent of primary expenditures and the households would be in a worse situation in terms of welfare. In fact, it can be stated that 24 percent of the household's initial expenditures in the form of money must be paid to the consumer so that the secondary price will be in a situation similar to the initial situation (before the scenario is implemented) and the reduction in welfare resulting from the removal of the preferred exchange rate will be compensated. Scenario 4 was defined as a change in global food prices due to the Russian-Ukraine war, indicating a 9.28 percent increase in the prices of the studied goods. In fact, the CV index shows the change in household spending after applying the scenario to the initial utility curve. The amount of the CV index indicates how much money the consumer must pay to have the same secondary price as the initial situation (before the scenario was implemented). Therefore, due to an average increase of 9.28 percent in the prices of the concerned commodity groups/goods during the Russian-Ukraine war, household spending increased by 6.302 percent of the initial spending, leading to a decrease in household welfare.
Conclusion and Suggestions: The study findings confirm that the most negative welfare effects were caused by the preferred exchange rate, which on average caused an increase of about 24 percent in the initial expenses of households. Therefore, considering that the effects of removing the preferred exchange can now be better measured, the government should review the adopted policies and, if necessary, compensate the well-being of households that has decreased due to the removal of the preferred exchange rate by redefining more targeted and precise policies. In fact, economic policies should be designed in such a way that an optimal combination of justice and efficiency is realized and the negative welfare effects of the examined scenarios are compensated by direct payments or subsidies for low-income groups.