Welfare Effects of import tariff Reduction on rice market in Iran

The objective of this paper is to investigate the welfare effects of reduction in rice import tariffs as a major factor in price stabilization policy. Iranian government in certain time decided to reduce rice import tariff from 150% to 4% to prevent sharp price increase and protect consumers. For this purpose, time series data for period of 1386-1358 were collected from the Ministry of Agriculture, FAO database and Statistical Yearbook of Customs. The effects of such policy on domestic prices, demand, domestic production, import level, social welfare and tariff income were investigated under different scenarios i.e. tariff reduction of 100, 80, 40 percent and posing fixed tariff of 1500 Rials per kilogram using a simple partial equilibrium framework. Results showed that consumers gain at the expense of the producers and government. Other disadvantages of such policy were increase in probability of bankruptcy, failure of self sufficiency policy and more dependence on foreign markets. Finally, some recommendations were made to improve the situation.