Investigating the Economy of Scale in Iranian Rural Households

Investigating the economy of scale in household is an important issue in welfare economics. Accordingly, the present study examined this phenomenon in Iranian rural households through the scale function and a system model-based on Deaton and Muellbauer (1980). Data collected from the cost and income sampling plan in 2011. Results showed the economy of scale in consumption is visible in Iranian rural households. Detailed results indicated in line with Engel's law with increasing household size, share of food is increased but the economy of scale phenomenon in housing is visible. Accordingly, in perspective of welfare economics to improve the welfare of households with the highest rates, housing preparation policy or assistance in housing preparation policy for large and crowded households because of its economy of scale is a key priority.