Political Analysis of Reaction of Production, Labor and Capital to Energy Pricesin Selected Big Industrial

The subsidy is one of the vital policy tools adopted by the government. As one of the energy exporting countries, Iran carried out fundamental reforms and revised the provision of subsidies for essential goods, especially energy carriers, in 2010. Energy is one of the most important production inputs. Therefore, the price correction of energy carriers has a high sensitivity in the country's economy, especially in the industry sector. Since the highest output value of the industrial sector in Iran is related to large industrial workplaces, the effect of the increase in the price of energy carriers on the production function and labor and capital demand functions of the six industries with the highest output value and the highest value of fuel consumption during 1997-2019 was examined using the autoregressive distributed lag model in this study. Also, targeting energy subsidies has led to increased production in the industry of chemicals and chemical products in the long term. Therefore, the production of the chemicals industry and chemical products showed a more significant reaction to the increase in the price of energy carriers than the other industries examined above. As a result, policymakers should pay more attention to these industries than other industries.