The Straw that Could Break the Camel's Back: An Economic Analysis of Subsidies in the Iranian Economy

Dadkhah, Kamran and Zangeneh, Hamid (2000): The Straw that Could Break the Camel's Back: An Economic Analysis of Subsidies in the Iranian Economy. Published in: Journal of Iranian Research and Analysis , Vol. 16, No. 1 (2000): pp. 123-134.

Abstract

Subsidies and welfare payments play a large role in the Iranian economy. The numbers that appear in the government budget under welfare or subsidy payments are only the tip of the iceberg. A considerable part of subsidies paid by the Iranian government are hidden and do not appear in the budget. The government provides to the populace a number of goods and services at prices below their cost or far below prices prevailing in international markets. All said, the Iranian economy is crisscrossed with a network of hidden and visible subsidies that threaten the long-term health of the economy that the President himself has referred to as sick. To be sure, extending a social safety net to individuals and families who are economically vulnerable is a laudable act, and ranks high among the tasks of a modern government. Nevertheless, such undertakings have many economic implications. For a policy to be viable in the long run, all costs, apparent or hidden, and all tradeoffs should be considered. The objective of this paper is to evaluate the economic ramifications of Iran’s system of subsidies and President Khatami’s welfare proposal.

• Item Type: MPRA Paper
• Language: English
• Keywords: Iranian economy, hidden and visible Subsidies, welfare payments
• Subjects: O - Economic Development, Innovation, Technological Change, and Growth > O5 - Economywide Country Studies; H - Public Economics > H2 - Taxation, Subsidies, and Revenue

References

-- Anthony B. Atkinson and Joseph E. Stiglitz, Lectures on Public Economics, New York, McGraw-Hill, 1980; or the more recent but less technical book by Joel Slemrod, Tax Policy in the Real World, New York, Cambridge University Press, 1999.

-- Gary Becker, “Don’t Blame High Tech for Europe’s Job Woes,” Business Week, July 7, 1997, p.26.

-- Economic Report and Balance Sheet of Bank Markazi Iran, different years; and Plan and Budget Organization, Gozaresh Eqtessadi Sal 1375 (Economic Report of 1996), vol. 1, Tehran, 1997, p.175. -- BBC News on the Internet, December 22, 1999: news.bbc.co.uk/hi/english/world/middle_east/newsid_575000/575109.stm

-- Ibid, December 26, 1999: news.bbc.co.uk/hi/english/world/middle_east/newsid_579000/579092.stm -- Ettela’at International, January 5, 2000, p.2.