Abstract

The aim of this study is simulating the results of targeting subsidies on macroeconomics variables of agricultural sector in Iran. In order to achieving the objectives of this study, a multi-sector computable general equilibrium model with five quintiles of rural and urban households is developed to analyze the results of elimination and redistribution of subsidies according to the law of targeting subsidies in Iran. The results show that during targeting, high income and average income groups lose. Income rising (in the case of quintiles which their income rise) causes to increasing demand of agricultural products, food products and services in both urban and rural households. The level of factor demand in agricultural and food industrial sectors increases. Income of unskilled labours increase more than income of skilled labours. The produced commodities of petroleum, industrial and mineral sectors will be expensive and the other commodities will be cheap. The level of production in agricultural and food industrial sectors increase and in the other sectors decrease. Agricultural, food industrial and services exports rise and petroleum, industrial and mineral exports reduce. Agricultural imports increase and the level of imports in other sectors decrease.

Key words: Targeting subsidy, computable general equilibrium, agriculture, Iran.