Distributional impacts of gasoline supply constrained in Iran: application of input-output mixed price model

Abstract

Iran has always been the importer of gasoline over the last decade and international sanctions have made imports of this commodity potentially constraint. This condition as a supply constraint can damage the production of other economic sectors through rising in production prices and changing Iranian household welfare. Thus, a key question in this regard is how Iranian household expenditures will be affected in different consumer groups if the gasoline supply is constrained. To answer this question, the mixed-variable input-output price model and a symmetric Iran 38 × 38 input-output table for the year 2005 were employed. The results showed that most of the poor urban groups, especially the first eight groups, show a high sensitivity to the rise in gasoline prices and reduction in their overall expenditures. Nevertheless, rural households, unlike urban households, are heavily dependent on gasoline consumption, and do not reduce their expenditures in response to price changes.