Production Subsidies Elimination on Iranian Economy (Applying CGE Model)

In present study, the impacts of production subsidies elimination on production, export, import, employment, and different macroeconomic variables have been evaluated based on a Computable General Equilibrium model (CGE) for Iran's economy. The model applied the Iranian input-output table data of year 2002. Three scenarios include 25, 50, and 100 percent reduction in production subsidizing rate were analyzed, respectively. Results did not show any significant change in production and employment rate in oil and mineral production sectors, but implied a reduction in production, employment rate and exports of industry, agriculture and service in all scenarios. It found the food industry was the most vulnerable part of Iran's economy, so paying more attention to growth rate of agriculture and food industry may inevitably facilitate the elimination policy of production subsidies. With regard to negative consequences of production subsidies elimination overall agricultural sector, the agricultural products need more support on productivity growth in factors of production.