Welfare effects of environmental tax on the low-income Iranian households

Document Type : Research Paper

Authors

1 Department of Agricultural Economics, Marvdasht Branch, Islamic Azad University, Marvdasht, Iran

2 Fars Agricultural Research and Training Center and Natural Resources, Shiraz, Iran

3 Department of Sociology, Bushehr Branch, Islamic Azad University, Bushehr, Iran

10.22124/cjes.2024.7777

Abstract

The research focused on assessing the effects of escalating food prices on the welfare of low-income households in Iran. The study utilized household cost-income survey data from 2020 and calculated compensatory price elasticities using the quadratic almost ideal demand system. The findings revealed that all food price elasticities were negative and less than one, with the highest elasticity observed in dairy products, while the lowest in oil and fat. The income elasticity of food varied from 0.136% to 1.392%. The welfare impact of food price changes was assessed through the calculation of the welfare index of compensated changes, which indicated that the food Compensated Variation (CV) welfare index for low-income households due to the rise in food prices following the implementation of the pollution tax policy is $46.67, representing 33.22% of their food expenses. This means that the income of Iranian households is expected to increase by 33.22% due to the application of the environmental tax policy. Furthermore, the vulnerability index of households was projected to increase by 8.69% as a result of food price changes, but the provision of cash subsidies could mitigate this vulnerability by 3.54%.

Keywords

References

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Available Online from 28 May 2024

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