The Welfare Effects of Rising Imported Food Prices in Iran

Imports of food products account for a significant amount of total imports into Iran. Despite a rise in price of food products over the last two decades, there has been a rise in their imports. The present study was an attempt to analyze the import demand for foodstuffs through the use of a Quadratic AIDS model. Welfare impacts were also measured using compensated variation. The findings revealed own-price inelastic demand for all products, except for tea and cheese. The price response of food imports was found to be low. Overall, the rise in price of food products as high as their trend over the last two decades has resulted in an annual welfare loss of 2.2 percent.