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Title

THE IMPACT OF DWINDLING OF ELECTRICITY SUBSIDY ON CERTAIN MACROECONOMIC INDICES, AFFECTING ON THE PRODUCTION AND WELFARE OF HOUSEHOLDS IN IRAN

Pages

 Start Page 59 | End Page 86

Abstract

 Electricity is an important consumer input, in which it is provided to Iranian subscribers quite cheaper than the world prices, and it bears the great share in allocation of budget resources for paying subsidies to people. Thus, implementation of any energy reform policy, specifically related to the subsidy reduction in the electricity sector, as an instrument to attain the concerned goals, can in turn affect significantly on the activities of other sectors, markets and national account variables, quid pro qua.In this study, an attempt is made to investigate the impact of gradual mitigation of ELECTRICITY SUBSIDY on macroeconomic indices vestiging on production and welfare of households viz-a-viz building the COMPUTABLE GENERAL EQUILIBRIUM MODEL for Iran, and applying the SOCIAL ACCOUNTING MATRIX of 2001- 2002, in the framework of diminishing scenari of 25%, 50%, 75% and 100% respectively. The results prima facie indicate that in the short run, the abatement of subsidy in the electricity sector, will lead to increasing the rate of inflation, alleviation of economic growth and balance of payment deficit. Therefore the total production in all sectors will diminish which its biggest decreasing trend will go to the electricity sector output and the least diminution will be the products of service sector. At the same time the electricity price reform will pave the way for increasing the social class inequality and demarcation.Hence, we find that, the execution of this policy, will lessen significantly, the welfare level of households ipso facto.

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