Impacts of world prices transmission to domestic markets and welfare of marginal households : an empirical application to rice in Iran

Abstract EN

This paper attempts to assess the degree by which Iranian households have responded to the change in price of imported rice resulting from the exchange-rate unification.

In addition, it attempts to examine to which extent the policy has affected the economic welfare of various household income groups, particularly the poor.

Using samples of 2472 rural households and 2900 urban households selected from the national expenditure survey data of 2002 and 2003, Arming ton and pass-through elasticities are calculated as two measures of substitutability, and are discussed separately for each household group in both rural and urban areas.

The findings indicate that domestic rice prices are associated differently with imported rice prices by different households.

However, a price increase in imported rice, which is mainly consumed by the poor, worsens their position much more severely than rich people who prefer domestic rice.

In general, the findings of this study contribute to the understanding of how price changes resulting from trade liberalization may affect various groups of households and the ways they respond to such changes in prices.