Impacts of world prices transmission to domestic rice markets in rural Iran

Abstract

This paper attempts to assess the degree to which Iranian rural households have responded to the change in price of imported rice due to exchange-rate unification, and to examine the extent to which the policy has affected the economic welfare of various household income groups, particularly the poor. Utilizing samples of 2472 households selected from national expenditure survey data of 2002 and 2003, Armington and pass-through elasticities were calculated as two measures of substitutability, and are discussed separately for each household group in these areas. The findings of this study indicate that domestic rice prices are associated differently with imported rice prices among the households. However, a price increase in imported rice that is mainly consumed by the poor worsens their position much more severely than for the rich people who mainly prefer domestic rice. The findings 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.