Study on the Impact of Oil Income Shocks on agriculture: examination of Dutch Disease

Based on classic models of Dutch Disease, it has been forecasted that production in traditional and agricultural sector would decrease with an increase in oil price and income. In this paper, the impact of oil income shocks on agriculture sector of Iran was studied applying Hedrick Prescott filter, and also Two Stage least Square (2SLS) and simultaneous equation system was applied for analyzing oil income shocks during 1966-2007. The results indicated that the impact of oil income shocks on agricultural product is asymmetric. it means that negative shocks of oil income do not have a significant effect on agricultural production, but positive shocks of oil income has a negative and significant effect on agriculture sector.