Impacts of fertilizer subsidy reform options in Iran: an assessment using a Regional Crop Programming model

Mona Aghabeygi, Kamel Louhichi and Sergio Gomez y Paloma

Bio-based and Applied Economics Journal, 2022, vol. 11, issue 01

Abstract: The aim of this paper is to assess the potential impacts of different fertiliz-er subsidy reform options on the performance of the Iranian crops production sector. This is achieved using a Regional Crop Programming (RCP) model, based on Positive Mathematical Programming, which includes in total 14 crop activities and encompass-es 31 administrative regions. The RCP model is a collection of micro-economic mod-els, working with exogenous prices, each representing the optimal crop allocation at the regional level. The model is calibrated against observed data on crop acreage, yield responses to nitrogen application, and exogenous supply elasticities. Simulation results show that a total removal of nitrogen fertilizer subsidies would affect the competitive-ness of crops with the highest nitrogen application rates and lead to a slight reduction of national agricultural income, at approximately 1%. This effect, which is more pro-nounced at the regional level, is driven by area reallocation rather than land produc-tivity. The reallocation of nitrogen fertilizer subsidy to only strategic crops boost their production and income but increase disparity among regions and affects negatively welfare compared to the current universal fertilizer program. The transfer efficiency analysis shows that both target and universal simulated options are inefficient with an efficiency score below one.

Keywords: Agricultural; and; Food; Policy (search for similar items in EconPapers)
Date: 2022
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Working Paper: Impacts of fertilizer subsidy reform options in Iran: an assessment using a Regional Crop Programming model (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:aieabj:322749

DOI: 10.22004/ag.econ.322749

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