Energy Price Liberalization in Iran, a Threat or an Opportunity for the Agricultural Sector!?

Document Type : Research Article



Agricultural sector is one of the most productive sectors of the Iranian economy which has been exposed to energy price increases interact in the recent years. Energy is one of the most important factors affecting the performance of productive sectors such as agriculture which due to its key role in the production process, its probable reducing or increasing in demand and consumption is involving considerable importance. Therefore, this study seeks to answer that according to the subordinated relationship between agricultural performance and energy and other factors demand, how is the impact of liberalization of the energy prices on the demand for the Iranian agricultural major production factors. Hence, in this study, using the panel data for the period of 1991-2011 and the system of seemingly unrelated equations (ISUR) the conditional demand function of the production factors of the agricultural sectors was estimated for the provinces. Results showed that energy demand in the agricultural sector will reduce by the liberalization of the energy price. Also, the results showed that by increasing the energy carrier’s price, the demand for the production factors land and labor in the agricultural sector will increase. It is because of the adoption and continuation of alternative funding and allocation of credits for the energy consumption reforms to keep pace with the liberalization of the energy price. Finally, results showed that the outcome of these polices has caused that the liberalization of the energy prices can be seen as opportunity for the agricultural sector.