This study attempts to analyze the effects of wheat market liberalization and abolishing government intervention on social welfare, using time series data of 1961- 2000. Applying a partial equilibrium model (including wheat demand, supply and import functions) and Auto Regressive Distributive Lag (ARDL) model, price elasticities of wheat demand and supply were estimated which were found to be -0.12 and 0.19, respectively, implying inelasticity in both sides of the market. The calculated elasticity’s alongside with the method introduced by Dasilva and Grans (1999) were used to evaluate production, consumption and total welfare impacts of the wheat market liberalization.
Base on the findings, whilst wheat market liberalization results in decreasing treasury cost, as well as social welfare and foreign exchange, it increases total social cost. However, the society is expected to gain from wheat market liberalization in Iran.