Jensen, JesperTarr, David2013-09-092013-09-092002-01https://hdl.handle.net/10986/15730The Islamic Republic of Iran has committed itself to substantial trade and market reform in its Third Five-Year Development Plan. It started out with nontariff barriers on all products, a dual exchange rate regime with the market rate more than four times the official rate, and domestic energy subsidies equal to about 90 percent of the cost of energy products. Many of these policies were justified as helping the poor. To analyze the effect of the reforms, separately and together, the authors develop a multisector computable general equilibrium model with 10 rural and 10 urban households. They find that the combined reforms could generate welfare gains equal to about 50 percent of aggregate consumer income. These gains reflect the large initial distortions-for example, energy subsidies equal to about 18 percent of GDP, and retail energy prices equal to about 10 percent of world market prices. Separately, trade reform would lead to gains of about 5 percent of income, exchange rate reform to gains of 7 percent of income, and energy pricing reform to gains of 33 percent of income. The authors' results show that well-intentioned commodity subsidy policies for the poor can have perverse effects. Direct income payments to all households (not just the poor) would vastly increase the incomes of the poor compared with the status quo. Moreover, if the combined reforms were implemented, the poorest rural household would receive gains equal to about 290 percent of its income, and the poorest urban household gains equal to about 140 percent of its income.en-USCC BY 3.0 IGOAGRICULTURAL COMMODITIESAGRICULTUREAPPLIED TARIFFAVERAGE TARIFFBENCHMARKBENCHMARK EQUILIBRIUMCAPITAL INFLOWSCENTRAL BANKCONSTANT ELASTICITY OF TRANSFORMATIONCONSTANT RETURNS TO SCALECONSUMER INCOMECONSUMERSCOST MINIMIZATIONCOUPONSCURRENT ACCOUNTCUSTOMS VALUATIONDEBTDEMAND FOR GOODSDOMESTIC CONSUMPTIONDOMESTIC MARKETDOMESTIC PRICEDOMESTIC PRICE OF IMPORTSDOMESTIC PRICESDOMESTIC PRODUCERSDOMESTIC PRODUCTIONDOMESTIC PRODUCTSECONOMIC IMPLICATIONSECONOMICSELASTICITIESELASTICITYEQUILIBRIUMEQUIVALENT VARIATIONEXCHANGE RATEEXCHANGE RATE REGIMEEXPORT MARKETSEXPORT PRICESEXPORTERSEXPORTSFACTORS OF PRODUCTIONFOREIGN EXCHANGEFOREIGN TRADEGDPGENERAL EQUILIBRIUM MODELGOVERNMENT EXPENDITURESIMPACT OF TRADEIMPACT OF TRADE LIBERALIZATIONIMPERFECT COMPETITIONIMPORT DUTIESIMPORT DUTYIMPORT PROTECTIONIMPORT TARIFFIMPORTSINCOMEINTERMEDIATE GOODSINTERMEDIATE INPUTSINTERNATIONAL PRICESINTERNATIONAL STANDARDSMARGINAL COSTMARGINAL COST PRICINGMARKET MECHANISMMARKET PRICESMINESNATURAL RESOURCESOILOIL SECTOROPECPOLICY RESEARCHPOLITICAL ECONOMYPOVERTY LINEPRIMARY FACTORSPRIVATE CONSUMPTIONPRIVATE GOODSPRIVATE SECTORPRODUCERSQUANTITATIVE ESTIMATESQUOTA RENTSQUOTASREAL EXCHANGE RATEREAL WAGERENT SEEKINGRENT SEEKING BEHAVIORRESOURCE ALLOCATIONRETURN ON CAPITALTARIFF BARRIERTARIFF BARRIERSTARIFF DATATARIFF EQUIVALENCETARIFF EQUIVALENTTARIFF EQUIVALENTSTARIFF RATESTARIFF REDUCTIONTARIFF REVENUETARIFF REVENUESTERMS OF TRADETERMS OF TRADE EFFECTSTRADE LIBERALIZATIONTRADE LIBERALIZATION INCREASESTRADE POLICYTRADE REFORMTRADE TAXESUNIFORM TARIFFSUNSKILLED LABORVALUATIONVALUE ADDEDVALUE OF EXPORTSVALUE OF IMPORTSWAGE RATEWAGESWELFARE GAINSWORLD MARKETSWORLD PRICESWORLD TRADEWORLD TRADE ORGANIZATIONWTOZERO PROFITSZERO TARIFFS INTERNATIONAL TRADEFOREIGN EXCHANGEENERGY POLICYREFORM POLICYECONOMIC IMPLICATIONSCOMMODITIESSUBSIDIESWorld Bank10.1596/1813-9450-2768