Investigation of Distributional Impacts of Rising Water, Food and Energy Prices on Economic System

Water, food and energy (i.e. fossil fuels and electricity) are the three basic elements in the economic system that international reports emphasize the need for attention to the relationship between them in order to achieve sustainable development. Considering the various consumption trends and shocks affecting the connection of water, food and energy in Iran, this study aimed mainly at tracking the price effects that can be transmitted by each of the components of the connection to each other in the face of exogenous price shocks. To obtain price transfer patterns, the Social Accounting Matrix (SAM) was used. In this regard, the incremental coefficients analysis approach was used, considering its ability to show the distributional effect of price shock through the economic system according to the purpose of the present study. Also, the technical-economic coefficients of water, food and energy connection were calculated by considering interactions with other economic sectors. The results showed that not only the price coefficients were different in the general state, but also in the analyzed state, it indicated the transfer of the price in an unequal way; and since food and energy had different subsectors, their price interactions were also completely different; in other words, the price effects of energy sub-sectors on food sub-sectors had significant differences. Therefore, if economic policy is made without paying attention to price coefficients, indirect effects in the economic system will lead to negative consequences. So, it is suggested that before adopting the economic policy, the results of the price transfer should be taken into consideration in the form of guide tables and appropriate policy should be made according to the possible consequences.