Determining welfare effects of technological improvement policy for sugar beet

As an industrial crop, sugar beet plays an important role in meeting domestic demand for sugar. Given the higher level of imported sugar in Iran, the application of protectionist policies is an approach for supplying required sugar. One of these policies is technological improvement. In order to study the effect of this policy, sugar beet supply and demand equations in 1971-2008 were fitted by two-stage least squares method and then, the impact of technological improvement on the welfare of producers, customers and finally, on social welfare was examined under three scenarios of 1, 4 and 10% reduction of prices resulting from technological improvement. Results show that price elasticity of demand is -0.02 and of supply is 0.013. Furthermore, we found that this policy provides more protecttion for the consumers under all studied scenarios given the share of consumer's welfare surplus from total social welfare surplus.