Analysis of demand side policies on the growth of Agricultural Products in Iran

Document Type : Research Paper

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The main objective of this study is to examine the impacts of two demand side policies, namely; expanding food industries and externally increase in households’ demand for agricultural goods ,on the growth of products in agricultural subsector. To this end, a social accounting matrix (SAM) is constructed based on the latest Iranian input- output table released in 2001. Then, production multipliers and income effects were calculated for four main agricultural subsectors. Finally, multiplier coefficients were decomposed, using the structural path analysis approach to distinguish short run and long run effects of the two policies. Results indicate that among agricultural related industries, food processing industry has a high potential for accelerating growth of raw agricultural products, both in short run and long run. Expansion of other related industries such as tobacco processing, carpets and rugs, hotel and restaurant services and agricultural activities are in the second place. Results of estimating income effects show that the impacts of income injection to the household groups, specially to lower income groups on growth of raw agricultural products is significant. Furthermore, redistribution of income from high to low income groups has almost the same effect. Accordingly, the latter two policies can be viewed as an alternative policy for agricultural growth both in short run and long run.

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