Trade, Exchange Rate, and Energy Pricing Reform in Iran: Potentially Large Efficiency Effects and Gains to the Poor

Jesper Jensen and David Tarr

Chapter 13 in Applied Trade Policy Modeling in 16 Countries:Insights and Impacts from World Bank CGE Based Projects, 2014, pp 307-326 from World Scientific Publishing Co. Pte. Ltd.

Abstract: Iran is committed to substantial trade and market reform in its Third Five Year Development Plan. It started, however, with nontariff barriers on all products, a dual exchange rate regime with the market rate more than four times the official rate, and domestic energy product subsidies of about 90%. The authors develop a multisector computable general-equilibrium model with ten rural and ten urban households to analyze the various reforms, separately and together. Reflecting the large initial distortions, they find that the combined reforms could generate large welfare gains equal to about 50% of aggregate consumer income. Moreover, the results show that well-intentioned policies of commodity subsidies for the poor can have perverse effects. Even nontargeted direct income payments to all households (not just the poor) would enormously and progressively increase the incomes of the poor compared to the status quo.

Keywords: International Trade Policy; Developing Countries; Computable General Equilibrium; World Bank; Regional Trade Policy; Services Liberalization; Foreign Direct Investment; Trade and Poverty (search for similar items in EconPapers)
Date: 2014
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Journal Article: Trade, Exchange Rate, and Energy Pricing Reform in Iran: Potentially Large Efficiency Effects and Gains to the Poor (2003)
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