:: Volume 10, Issue 2 (Spring 2015) ::
J. Mon. Ec. 2015, 10(2): 23-47 Back to browse issues page
The Effects of Energy Subsidy Reform on Fuel Demand in Iran
Hossein Mirshojaeian Hosseini *1, Vahid Majed1, Shinji Kaneko2
1- Faculty of Economics, University of Tehran
2- Graduate School for International Development and Cooperation, Hiroshima University
Abstract:   (2228 Views)

To prevent further increases in energy consumption, the government of Iran commenced energy subsidy reform in 2010. This paper investigates the fuel conservation effects of the reform in Iran using a homothetic translog cost function that provides estimates of the own- and cross-price elasticities of fuel demands. The percentage reduction in fuel demands is estimated using the likely effect of the reform on fuel prices. The results reveal that the reform may not be as successful as assumed. Under optimistic assumptions, the reform may reduce energy consumption marginally, and under pessimistic assumptions, it may increase energy consumption because of inelastic fuel demands and substantial substitution between fuels.

JEL Classifications: C32, Q38, Q43

Keywords: Energy subsidy reform, Fuel demand, Iran, Translog cost function
Full-Text [PDF 577 kb]   (1898 Downloads)    
Type of Study: Research | Subject: Macroeconomics
Received: 2016/10/22 | Accepted: 2016/10/22 | Published: 2016/10/22

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Volume 10, Issue 2 (Spring 2015) Back to browse issues page