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Export constraint and domestic fiscal reform: Lessons from 2011 subsidy reform in Iran

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  • Gahvari, Firouz
  • Karimi, Seyed Mohammad

Abstract

This paper uses the 1987–2011 Household Budget Surveys from the Statistical Center of Iran consisting of 293,953 observations, coupled with the price data from the Central Bank of Iran, to estimate the structure of demand for goods and services in urban areas of Iran. The estimation procedure assumes a Quadratic Almost Ideal Demand System (QUAIDS) introduced by Banks et al. (1997). It then uses the estimated demand system to study the implications of the removal of the massive subsidies on energy and basic foodstuff that were in place in Iran at the end of 2010. It examines the changes in the economy's consumption patterns, income distribution, private and social welfare, and the environment. The paper's key contribution is to recognize and study how the results of this domestic reform depended on international trade barriers faced by the country. It shows how a seemingly welfare improving policy in the absence of export restrictions turned out to be quite the opposite—at least for the current generations of Iranians.

Suggested Citation

  • Gahvari, Firouz & Karimi, Seyed Mohammad, 2016. "Export constraint and domestic fiscal reform: Lessons from 2011 subsidy reform in Iran," The Quarterly Review of Economics and Finance, Elsevier, vol. 60(C), pages 40-57.
    • Handle: RePEc:eee:quaeco:v:60:y:2016:i:c:p:40-57
    DOI: 10.1016/j.qref.2015.09.003
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    Citations

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    Cited by:

    1. Ali Enami & Nora Lustig, 2018. "Inflation and the Erosion of the Poverty Reduction Impact of Iran's Universal Cash Transfer," Commitment to Equity (CEQ) Working Paper Series 68, Tulane University, Department of Economics.
    2. Saeed Solaymani, 2021. "Energy subsidy reform evaluation research – reviews in Iran," Greenhouse Gases: Science and Technology, Blackwell Publishing, vol. 11(3), pages 520-538, June.

    More about this item

    Keywords

    Price subsidies; Fiscal reform; Export constraints; Uniform rebates; Private and social welfare gains; Environmental consequences;
    All these keywords.

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General

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