The Effect of Subsidy Targeting on the Iranian Urban Household's Expenditure Patterns

Expenditure pattern is how to combine various expenditure to form a certain level of household consumption level. After optimization of current and future consumption, household chooses combination of expenditure that maximizes current and future welfare together. In this research we examine the effects of implementation of Subsidy Targeting plan on the Iranian urban household’s expenditure pattern within years 2004-2013 using panel-data method.
The results show that in urban segment, targeted subsidies had a significant impact on 9 of the 14 expenditure groups. Among the 5 groups share of meaning food, transportation, cultural and entertainment, hotel and restaurants other goods and services expenditures have increased. Whereas, share of 4 groups health care, communications, education and investment expenditures have reduced. Therefore it could be argued that targeted subsidies plan implementation through changes in the composition of expenditures had a significant impact on the expenditures pattern in urban segment.