The Effect of Government Support Policies on the Supply of the Products of Agricultural Processing Industries

This study aimed to analyze the impact of government support policies on processing of agricultural products. For the analysis, a supply function was estimated using Iran’s pooled data of the firms of the agricultureal processing industries for the period of 2001 to 2010. Government support policies was separated into two parts, energy subsidies and bank facilities. Results showed a 10 percent increase in energy subsidy would increase the supply of agricultural processing product (SAPP) by 1.2 percent and a 10% increase in bank facilities would increase SAPP by 3.4 percent. According to the results it is recommended that the government gradually reduces these subsidies and pushes the short term subsidy support further.