Simulation of Direct Payment Policy in Agronomy Subsector(Application of PMP & ME Techniques)

Bakhshi, Mohammadreza; Peykani, Gholamreza

doi:10.22059/ijaedr.2012.28582

Simulation of Direct Payment Policy in Agronomy Subsector(Application of PMP & ME Techniques)

Authors

Mohammadreza Bakhshi

Gholamreza Peykani

10.22059/ijaedr.2012.28582

Abstract

Harmful economic, environmental and financial impacts of fertilizer distribution through subsidies as well as its contradiction with regulations of WTO, it makes necessary to adopt a new policy. In this study, by combining Positive Mathematical Programming and Maximum Entropy technique, the impacts of cancellation of fertilizer subsidies and applying proposed direct payment policies on gross margin, output and input levels were simulated under four scenarios.
Results show that replacing fertilizer subsidy with direct payment policy leads to decreasing of fertilizer use up to 17.38, 9.39 and 13.59 percent in first, second and third group of farmers, respectively. In view of the fact that results show the current policy of fertilizer subsidy isn’t efficient, applying a proposed direct payment policy is suggested to increase the economic and benefits environmental safety of fertilizer use.
JEL classification: co2, c63

Keywords

Direct payment

Fertilizer

Maximum entropy

Positive Mathematical Programming

simulation

subsidy