Planning and Budgeting

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Subsidies payment is a policy to guarantee the social security, yet its real effectiveness on the social welfare and meeting the envisaged goals is open to question due to imposing heavy expenditure and shortage of public resources. Therefore, keeping the necessity of subsidies target-orientation in mind, this research tries to estimate the budget credit required to execute target-oriented protective policy in establishing the food security. As getting access to real quantitative values of consumers’ preferences through the use of cross-sectional data is more precise, this paper uses household cost-income detailed data in 2009 in the framework of the consumption amount and the costs of 216 food items in 10 cost groups categorized in urban and rural divisions. The methods and techniques employed in this study are as follows: Modeling to Generate Alternative (MGA), Approximated Almost Ideal Demand System (AIDS), and Compensating Variation (CV). Thus a quantitative relationship was made between definable factors of ‘food - nutrition security’ and welfare effects of price liberalization of the commodities effective in food security. The results indicate that the amount of subsidies allocated to the target group (while having fulfilled the optimal basket and considering the scenarios explained on the price liberalization) were respectively 449884, 51025, 51777, and 52572 billion Rials it is about 5.15, 5.27, 5.35, and 5.43 percent of the total public budget in 2009, the base year of the study.

Keywords: Food Security, Protective Policies, Optimal Food Basket, Approximated Almost Ideal Demand System, Compensating Variation, Welfare Effects

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