Analysis of Regional Effects of Wheat Market Liberalization in Iran

The policymaker is sensitive to the consequences of the policy change in the wheat market on food security and livelihood of the community. Wheat market is covered by a guaranteed purchasing policy, cheap food policy (consumer subsidy), and non-tariff barriers (imports by government). Guaranteed purchase policy issues (the inefficiency of resource allocation, market diversion and increased waste) in general and the cost of its implementation have increased the tendency to change the executive policy in the wheat market. In this study, the effects of changing the policies in the wheat market for the four selected alternatives were been analyzed. The research was carried out using a positive regional mathematical programming model and data for the 2013-2014 crop year for 8 agro-ecological zones. The findings of the study indicate the importance of complementary trade policy for wheat markets. Implementing the scenario to eliminating consumer subsidies and commercial liberalization in the presence of a guaranteed purchasing policy will have less negative effects, but will increase the likelihood of the sale of imported wheat to the government. The removal of guaranteed purchasing policy without trade liberalization creates welfare losses for both the producer and the consumer. Full liberalization of the wheat market and direct payments to both groups will reduce government costs, consumption and wheat waste, but in order to prevent a significant drop in domestic prices and rising government spending costs, it should implement with a certain level of commercial support.