The Welfare Loss of Rising Food Prices: Application of Panel- SURE Regression in Iranian Provinces

The aim of the present study is to evaluate the expenses of urban households in the provinces of Iran using the Almost Ideal Demand System (AIDS) based on the Panel Data method and extracting price and income elasticities in five food groups which possess a high degree of importance in the households ' food basket (bread and grains, meat, dairy and eggs, fruits and dried fruit, vegetables and legumes), and also extracting the Compensating Variation (CV) index in order to evaluate the welfare loss among these households. The results obtained from pattern analysis using the Seemingly Unrelated Regression (SUR) method for the budget data of the families in various provinces of the Iran from 2003 to 2014 revealed that the price elasticity of all the food groups except the fruit and dried fruit group is based on theoretical and negative expectations and there are different sensitivities to price variations for these food groups in different provinces. Also, based on the income elasticity, bread and grains and meat groups are considered necessity goods, and dairy and eggs, fruit and dried fruit, and vegetables and legumes groups are among luxury goods. The calculation of Compensating Variation also indicates that the households face a welfare loss as a result of the increase in the price of food. In average, the housholds in Tehran Province have the highest, and the families in Qom Province have the lowest welfare loss rates with 23 and 14 percent respectively. Also, a .... (250 Word!)