Research Article
N. Ashktorab; Z. Nematollahi
Abstract
Introduction: Measuring changes in economic welfare has been known as one of the practical economic issues. So, this study aimed to calculate the welfare changes resulted from the changes in Iran food prices. To accomplish such task, welfare macroeconomic theory, compensating variation (CV) criteria, ...
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Introduction: Measuring changes in economic welfare has been known as one of the practical economic issues. So, this study aimed to calculate the welfare changes resulted from the changes in Iran food prices. To accomplish such task, welfare macroeconomic theory, compensating variation (CV) criteria, household income and expenditure data of Iran in 2014 were used. The purpose of this study is to provide scientific solutions to assess consumer behavior and estimate the price elasticity of goods.
Materials and Methods: Compensating variation represents the net income that must be given to household in order to restore them to the utility level they have been before the price changes. The price change is negative after an increase because it is expressed as a central authority’s expenditure to restore the household to the pre-price change utility level. In order to estimate compensated variation, at first household's demand system should be estimated. So, the parameters of the demand system are estimated by applying nonlinear seemingly unrelated regression to the system of eight share equations. Parameter estimates, summarized in form of income and price elasticities, provide more clear understanding of household food consumption behavior in 2014 and also these parameter estimates provide a theoretically consistent model of household food demand that can be used to evaluate the welfare impressions of food price increases.
Results and Discussion: Uncompensated own price elasticities are calculated. Due to the absolute value of the coefficients of elasticity, it can be stated that for urban households the demand for all selected goods, other than oil and fat, is not elastic to price changes. Investigation of the non-compensatory cross-sectional for cereals indicates the existence of a complementary relationship between cereals and most foods. Meanwhile, the most and the least complete complementary relationship is between cereals- meat and cereals - sugar. In other words, urban households after the inclusion of cereals in their basket regard this food as a supplement to their food basket. Investigating cross-sectional elasticity of meat in urban households revealed a substitution relationship between meat, dairy, oil and fat, fruits, vegetables and sugar. According to the absolute value of cross-sectional, it can be stated that there is a weak substitution relationship between the desired foods. The positive sign of cross-sectional elasticity implies an increase in meat consumption in urban households as a result of rising food prices. Also, the relationship between meat and cereals with respect to the negative elasticity is a Complementary relationship. Therefore, a one- percent increases in the price of cereals, assuming that the other requirements for meat demand are fixed, leads 0.023% to –percent decrease in meat demand. Based on the results of Table 2, non-compensatory cross-sectional of dairy products indicates the existence of complementary relationship between dairy products and cereals. Other cross-sectional elasticities for dairy products are positive and indicate the substitution relationship of dairy products with other foods, including meat. The highest ratio of substitution to dairy is tea and coffee with cross-sectional elasticity equals 0.415%. Therefore, urban households, after adding dairy products in their basket, add tea and coffee as a substitute for dairy products to their food basket. An examination of cross-sectional elasticity for oil and fat indicates the existence of a complementary relationship between oil and fat with fruits, tea and coffee. In other words, urban households after adding fat and oil in their basket will add fruits, tea and coffee as a complement to their basket, which means increasing the consumption of fruits, tea and coffee along with fat and oil consumption for urban households.
Results of current study indicate of high income elasticity for cereals due to the variety of goods as well as existence of numerous types of cultivars processed in this kind of foods. So this kind can be considered as luxury especially for the types of processed products. The elasticities of other foods are positive and smaller than one. So these foods are considered as essential commodities for urban households.
In the next section, three scenarios including 15, 25 and 50 percent increase in food prices are considered and the impacts of changes in food prices on urban household expenditures are calculated by means of the welfare index of compensatory changes for the eight main food groups. Results reveal that for urban households the average consumption of meat is higher than other food stuffs. After meat, the highest consumption expenditure is allocated to cereals with the average consumption expenditures calculated for urban households s 892,000 Rials. In other words, these two groups of foods including cereals and meat are among the main commodities in the household food basket.
Conclusion: Considering the importance and share of food commodities in the consumption basket of households, this study examines the effect of rising prices of edible chips on welfare and consequently on poverty of urban households. In this regard, the quadratic ideal demand system has been applied to estimate the demand for household food commodities and the criterion of compensating variation has been used as the welfare measure The results show that, given the absolute value of the coefficients of own elasticity, it can be stated that for these households demand for all selected goods other than oil and fat is inelastic in response to price changes. Therefore supposed that foodstuffs have a high share of the households basket, it is necessary to provide financial support to maintain the welfare of households and pay equivalent compensatory changes calculated to retain the desirability of households.
Research Article
M. Sookhtanlou
Abstract
Introduction: Moghan plain (Ardabil province) always has been considered as one of the important pillars of agriculture in Iran. However due to the new climatic changes, increasing occurrence of phenomena such as drought and reduction of water resources, and spread of pests and weeds, farmers facing ...
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Introduction: Moghan plain (Ardabil province) always has been considered as one of the important pillars of agriculture in Iran. However due to the new climatic changes, increasing occurrence of phenomena such as drought and reduction of water resources, and spread of pests and weeds, farmers facing with the phenomenon of risk as a major challenge in the region. Farmers will be obliged to make decisions about allocating resources to their agricultural productions which facing environmental conditions and different biotic and abiotic risks, as ambient conditions, the status of inputs and outputs prices and their agronomic performance, are not stable enough. Finally, these conditions influence farmers' agronomic decisions which under such circumstances the results of farmers' decision making are different from the results in safer conditions. There are also different values of inputs consumption in risky and safe agricultural conditions and these values also depend on other factors such as variance of the product price, the degree of risk aversion and the marginal share of inputs in production variance as well as outputs and inputs prices and production levels. In this regard, agricultural crop insurance is one of the major management strategies to overcome agricultural risks, weather and other unavoidable natural hazards. Risk management is an appropriate management of operational unit with awareness and understanding of the environment and risky factors. It is actually one of the ways to increase productivity of production factors and to improve the efficiency of farming operation systems through making suitable decisions about controlling risk factors and resources. Therefore, increasing range of production risk and the importance of agricultural crops insurance of maize production in Moghan plain led to investigate and determine the effects of agricultural crops insurance adoption on the components of production risk management among the maize farmers of Moghan plain.
Materials and Methods: This study is an applied one based on descriptive-correlative method that was designed and implemented in 2016-2017. Study area was Moghan plain that it located in the northern part of Ardabil province. Sampling method was multi-stage and applying the Yamane (1967) formula. Data including sample size of 278 maize farmers in 9 villages were collected. The research instrument was a questionnaire including 69 items in three sections (personal and professional characteristics, determining risk aversion coefficient and risk management components). Items of questionnaire were composed of personal and professional characteristics of respondents (18 items), variables determining risk aversion coefficient (19 items) and risk management components (32 items). Risk management components were consisting of planting risk management (5 items), maintenance risk management (5 items), harvest risk management (4 items), Risk management of economics and marketing (5 items), risk management of farm and technical infrastructure (7 items) and the risk-sharing management (6 items). Items of risk management components with equal weights were collected in the five-part Likert scale (the range of 1 (very low) to 5 (very much)).
To calculate the risk aversion coefficient and the risk sentiments in maize farmers' decision-making, we used safety first rule (SFR). For the final analysis of the main purpose of the research was to use the binary logistic regression method in step-by-step approach.
Results and Discussion: According to study results, maize farmers with different risk aversion coefficient, includes four groups as follow: 1: risk-taker (15.1% of respondents); 2: risk-neutral (19.8% of respondents); 3: low risk-averse (37.4% of respondents) and 4: high risk-averse (27.7% of respondents). There was also a significant difference between the adopter and non-adopter maize farmers of insurance based on the degree of risk aversion. In other words, non- adopter maize farmers of insurance had significantly higher risk aversion compared to adopter maize farmers of insurance. Based on the results of logistic regression, from among 17 studied factors in eight steps, only 8 components including education (B = 0.254), average annual agricultural income (B= 0.68), number of agricultural risks (B =0.361) and risk-sharing management (B=0.447) at 5% level, and risk management variables of economics and marketing (B= 0.492), planting risk management (B = 0.382) and risk management of farm and technical infrastructure (B = 0.617) at 1% level were positive and significant. But for the component of age (B= -0.142) a negative and significant relationship at the 5% level was found.
The results of calculating the risk aversion coefficient showed that majority of maize farmers were risk-averse (65.1%). Also, the adopter maize farmers of insurance were significantly less risk aversion than non-adopter maize farmers of insurance. Many number of maize farmers in the area are small-holder farmers (mean of farm lands size equals 5.0054 hectares). The smallholder farmers compared to other farmers are very vulnerable facing with the agricultural risks, so this leads to high risk eversion level of maize farmers in the study area compared to other farmers. Also, the adopter maize farmers of insurance were significantly less risk aversion than non-adopter maize farmers of insurance. The results of logistic regression showed that among various types of risk management components, planting risk management (Wald: 0.382), risk management of economics and marketing (Wald: 0.492), risk management of farm and technical infrastructure (Wald: 0.617) and risk-sharing management (Wald: 0.447) had the positive and significant effects on agricultural crops insurance adoption.
Research Article
Y. Rostami; S. S. Hosseini; R. Moghaddasi
Abstract
Introduction: In recent years, price transmission analysis either spatially or vertically among separated markets has increasingly been drawn by methods that account not only for common non-stationary but also, for nonlinear dynamics in co-integration relationship of price series. If the price transmission ...
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Introduction: In recent years, price transmission analysis either spatially or vertically among separated markets has increasingly been drawn by methods that account not only for common non-stationary but also, for nonlinear dynamics in co-integration relationship of price series. If the price transmission is asymmetric among the specific stages of the supply chain, the price changes will not be affected quickly at the production level through the processing and/or retail level. A positive (negative) price asymmetry occurs, when a decrease (increase) is not immediately transmitted in prices at the farm level; whereas, an increase (decrease) would influence final consumer rapidly. Asymmetric price transmission is crucial because it influences welfare negatively. Prices allow producers and consumers to decide synchronously and also, leave the doors open for scarce resources to be allocated influentially. The transition from a planned economy to a market one mostly causes price liberalization come into play. However, price liberalization not only improves resource allocation but also, brings about higher price instability in comparison with an administrative system with fixed prices.
Materials and Methods: Many popular modeling techniques used to analyze vertical price transmission were initially investigated by using variations of a model which was first developed by Wolffram (1971) and later modified by Houck (1977), that known as a traditional approach in price transmission studies. The response of the retail price (RP) to a shock in the farm price (FP) was calculated by estimating the following equation:
Where:
and lnPr is the log of retail price , lnPf is the log of farm price, are the increases and decreases of the price at the farm respectively. M1 and M2 are legs duration and is coefficient of increase or decrease on retail price.
Markov-switching vector error correction model:
The Markov-switching vector error correction model (MSVECM) is a special case of the general Markov-switching vector autoregressive model which was initially proposed by Hamilton (1989) for analyzing the U.S. business cycle. The applicability of this model is, however, not restricted to this specific research question. Consequently, it can be viewed as a general framework for analyzing time series with different regimes whenever the corresponding state variable is not observed. According to the state of the system, MSVECM with shifts in some of the parameters can be expected to be more appropriate in this setting:
here, pt = (pft ,pmt)’ is the vector of market prices for farm (superscript f) and retail (superscript r), respectively, denotes the vector of intercept terms, α is the vector of adjustment coefficients, β is the co-integrating (long-run equilibrium) vector, ∆ indicates first differences, and D1, D2, … , Dk are matrices of short-run coefficients. The vector contains the residual errors of the farm and the retail equations.
Results and Discussion:-Houck`s model: The estimated parameters of the final Houck`s model are presented in Table 2
Table 2-Houck model results (dependent variable: retail price)
Price
transmission
Test
result
Valed
test
long run coefficient
Price change
Dec. Inc.
Short run coefficient
Price change
Dec. Inc.
Variable
Asymmetry
H0 riject
14.24
0.89 0.99
0.61 0.73
producer price
Source: Research findings
Markov-switching vector error correction model:
The number of regimes and lags were determined according Akaike information criterion. Therefore, a model with two regimes with three lags has finally been chosen and estimated. Adjustment pace, residual standard errors and the resulting margin in the long-run relation (which may be calculated from the estimated coefficient for the regime-specific constant and the corresponding adjustment rate coefficient estimation) allowed a more detailed interpretation of the single regimes to be put. Two regime equations are as follows:
Regime 1 Regime 2
LRMPt = -0.46 + 1.08LPMPt (4) LRMPt = -0.05 + 1.09LPMPt (5)
stdv (0.12) (0.01) stdv (0.04) (0.004)
Here regime 2, points to data that relates to 2003 until the end of 2006 and also, 2013 to 2015; whereas regime 1 refers to the first of 2007 till end of 2012. Thus the type of relationship between two series depends on policy actions that government adopts during the period. In other words, one should consider different relations prevailing in different periods and this is the novelty of current study in comparison with previous researches.
Conclusion: This paper analyzed vertical market integration for Iranian fluid milk market over the years 2003-2015. We exploit Houck and MSVECM models in order to analyze market integration deploying 153 monthly observations from March 2003 to December 2015. The results of this paper corroborate a view, claiming retailers can exercise significant market power, as used to be evidenced by asymmetric price responses in Iranian fluid milk market. Due to the existence of positive price asymmetry in farm-retail price transmission, the retail prices would be inclining more quickly to increases in farm price than to decreases implying serious welfare losses to the consumers. This result is also consistent with the empirical evidence of a significant market power in the milk market.
Research Article
R. Mohammadi; F. Lashgarara; M. Omidi Najafabadi
Abstract
Introduction: Villages and villagers have a major role in dynamics of the country's economy, such as contributing to economic growth, controlling inflation, increasing employment rate and providing a suitable basis for agricultural, industrial and livestock products as well as environmental protection. ...
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Introduction: Villages and villagers have a major role in dynamics of the country's economy, such as contributing to economic growth, controlling inflation, increasing employment rate and providing a suitable basis for agricultural, industrial and livestock products as well as environmental protection. So, rural development is one of the prerequisites for national development. On the other hand, one of the most important aspects of rural development is its economic dimension. Today, improving rural economy is one of the major goals in national planning. In this regard, it is necessary to recognize the capabilities and potentials of each region. In the current era, ICTs with their multiple capabilities, can be one of the greatest opportunities for improving the rural economy.
The research is carried out in Garmsar city. In this city, there are some shortcomings in marketing, distribution of products and employment chances which result in increasing rural population's migration. Most of these problems are caused by lack of awareness of market information (such as customer requirements, sales prices, packaging and grading, lack of identification of relevant markets, inappropriate distribution and etc.), lack of skills for commencing new jobs, lack of familiarity with the new production, weakness in research and in general lack of attention to the factors affecting the rural economy which are directly and indirectly originated from lack of information and communication. Therefore, the study of rural economics is inevitable because it will increase its efficiency and effectiveness and ultimately accelerate national development. This study aims to identify the role of ICTs in rural economics. In this regard, the following objectives were formulated:
assessing and identifying the state of rural economy in the city
investigating the capabilities of ICTs in rural economies
Examining the relationship between the capabilities of ICTs and the rural economy.
Materials and Methods: Methods of analysis used in this study involve a combination of descriptive and quantitative research methods. Descriptive statistics and structural equation modeling (SEM) are used for data analysis. Dependent variable of current study is the rural marketing environment and independent variables are ICT capabilities in four sectors including financial, behavioral, notification and technical. The study hypotheses are examined by studying the relationships between mentioned variables and their direct and indirect effects using SEM analysis. Following data extraction, descriptive statistics and SEM analysis are conducted using the SPSS20 and AMOS20 software, respectively. The research method involves a causal-comparative approach. The statistical populations consist of rural cooperative members working in the field of rural marketing who apply ICTs in their activities. Due to the limited population size, the sample was equal to the population and a census method was used (N=n=140). The main tool used for data collection is a five-part questionnaire designed using PEST analysis in the 5-point-Likert scale format. The content and face validity are established by a panel of experts comprising faculty members and specialists in rural marketing. A pilot study is conducted with 30 experts for determining the questionnaire’s reliability, which is obtained using ordinal theta coefficients. The reliability is verified for each section of the questionnaire: the theta coefficients been estimated between 86% and 90%, indicating an acceptable level of reliability.
Results and Discussion: Based on the obtained information, more respondents (42.5%) believe that the rural economy is fairly desirable, as well, 36.2% of respondents believe that ICT capabilities play a significant role in the rural economy. Using the exploratory factor analysis, ICT capabilities are grouped into four main financial, technical, behavioral, and informational groups. As a result, ICT capabilities have a significant positive effect on rural economy. Among them, financial capabilities with the highest estimate (0.84) has the most accomplishment on dependent variable (rural economy). To evaluate the suitability and fit of the model, the goodness-of-fit measures are used, and according to the obtained criteria, the model provides appropriate fitting to data.
Conclusion: Today, governments have widely recognized the role of ICTs in economic development and many countries are implementing ICTs as a key factor to improve the economic environment. This study shows how ICT capabilities would facilitate the improvement of the rural economy and livelihood of rural communities. ICTs help quantitative and qualitative improvement of products with the possibility of selling direct and online, requirement for brokers to be reduced, opening the commercial doors and increasing sales and income of the villagers. Finally, it can be stated that ICTs are the basis for improving the rural economy.
Research Article
S.M. Ghaffari Esmaeili; A. Akbari; F. Kashiri Kolaei
Abstract
Introduction: Climate change is one of the most important issues that affect different sectors of the economy. Climate change affects precipitation and temperature and by disrupting optimal growth conditions will reduce crop yields and thus exert influence on food security and the spread of poverty in ...
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Introduction: Climate change is one of the most important issues that affect different sectors of the economy. Climate change affects precipitation and temperature and by disrupting optimal growth conditions will reduce crop yields and thus exert influence on food security and the spread of poverty in agricultural societies as a consequence. Production sectors, labor income and institutional income are affected by changing climate, and sectors that are more interactive with the agricultural. Specific features of the agricultural sector such as the dependence on climate variables have made this sector the focal point of climate change. Based on this, the present study examines the effect of climate change on economic growth of agriculture in Iran in the form of a dynamic computable general equilibrium model (DCGE).
Materials and Methods: In this research, DCGE has been used to investigate the effects of climate change (e.g. reduction of rainfall) on macroeconomic variables in Iran's agricultural sector. In order to implement the DCGE model, the social accounting matrix of 2011 has been used. The social accounting matrix represents the circular flow of funds between sectors, factors and institutions in a market economy. The social accounting matrix, which is a square matrix, is set up to equal the sum of rows and columns. The columns represent the receipts (revenue) and the rows represent the payments. Therefore, according to this definition, the total revenue of all accounts must be equal to the total expenditures of all accounts. In other words, the income of each economy is equal to the total cost of that economy. Since the social accounting matrix is a descriptive tool for illustrating the details of the structure of a country's economy, it will also be considered as a tool for general equilibrium analysis as it provides information on the relationship between production sectors and the external world as well as the relationship between income and consumption.
It should be noted that in the current study, the model was solved in the form of GAMS software. In order to estimate the results, it is necessary to go through two steps. At first, the model parameters are estimated to the value of the model decision variables then the solution would be equal to real values which are called calibration. Subsequently, by changing the variables related to climate change the model decision changes over the years are examined. In other words, by using the DCGE model, we studied the effects of climate change on important variables in the agricultural sector.
Results and Discussion: The results of this study about the effect of precipitation on the productivity of the agricultural sector indicate that one percent change in rainfall will reduce the productivity of agriculture by 0.79 percent. Based on the results of previous studies, by 2030 rainfall in Iran will be reduced by 9%, which means rainfall will decrease by an average of 0.3% per year. Thus, the productivity of agricultural sector will decreases by an average of 0.237% per year. Accordingly, the effect of changes in agricultural productivity (technological coefficient of Cobb-Douglas function), as a result of climate change, was measured on the macroeconomic variables of the agricultural sector including production, consumption, investment, exports and import. Results show that climate change decreases the production, consumption, investment and exports, and increases the imports by 2030.
Conclusion: The results of this study indicate that considering the amount of rainfall reduction in the 20-year horizon by 2030, the amount of production, consumption, investment and export of agricultural sector will decrease by 4.469, 5.025, 4.462 and 13.770 percent respectively, but imports in this sector will increase by 5.504 percent. Given the impacts of climate change on the macroeconomic variables in the agricultural sector, it is imperative that the government take appropriate measures to support this sector while confronting unfavorable climate. Considering role of capital in agriculture, results of this study indicate that due to the consequences of climate change in the assumed period the investment process of agricultural sector has a smaller share than other sectors. Therefore, in these circumstances, policies such as fixing the price of agricultural commodities, increasing the granting of loans by banks and other policies should be undertaken to encourage the private sector to invest in this sector.
Research Article
A.R. Chobdar; M. Aghapour Sabbaghi
Abstract
Introduction: Considering that achieving economic growth and development is one of the most important goals of any economic system, the identification of factors affecting economic growth has long been a subject discussed by economic experts . So far, there are two general attitudes concerning ...
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Introduction: Considering that achieving economic growth and development is one of the most important goals of any economic system, the identification of factors affecting economic growth has long been a subject discussed by economic experts . So far, there are two general attitudes concerning government's presence in the economy. One is the attitude of the minimal government, the origin of which is the physiocratic and classical schools, and the other is the maximum government supported by schools against classics presented by Marxists and socialists. The experiences of the developed countries illustrate the fact that the development of these countries has begun with a revolution in the agricultural sector. In these countries, particular importance is usually given to extending agriculture and can be achieved in various ways, such as supplying labor, capital, raw materials, meals and foreign currency to economic development and alsocreating a market for manufactured goods in the industrial sector. The economic growth of this sector also has been mentioned as a driving factor in the growth of other economic sectors. Analyzing the factors influencing this growth will be an important step towards the economic development of countries . In most developing countries, the factors affecting the growth and development of the agricultural sector due to government policies ,as one of the central issues, have been explored and analyzed. Given the dual nature of the effect of government size on growth in the agricultural sector, the study aimed to analyze the effects of convergence and its impact on economic growth in the country's provinces Despite many studies in this field done in the country scale, in current study, with emphasis on the use of panel data, information from all provinces in the period is used for the estimation.
Materials and Methods: The effect of government size on economic growth has led to extensive studies that these studies have tried to explain the observed phenomena. In this study, toward analyzing the effect of size of government on the agricultural sector growth, the binomial production function of Ram was first considered and then to differentiate the effects of capital types, the generalized model of the Mankijo-Romer-Weil model (MRW) has been applied. In this study according to the model of Mankiw - Romer and Weil ( MRW ), capital variable is considered in its various components including physical, social and human capital. Based on this model and using panel data provinces in the period 2007-2016 the effect of government size on the agricultural sector growth is studied. Another purpose of this study is to evaluate the convergence of the agricultural sector at the province level in both absolute and conditional beta forms.
Results and Discussion: The study of beta coefficients demonstrates that there is convergence in the value added of agricultural sector across the provinces of the country . On average, it lasts about 17 years to cover half of the distance between its initial position and its steady state. Inclusion of the government has reduced the speed of adjustment and convergence among the provinces.
According to the results of the related tests, a fixed effect pattern has been considered for model estimation. Results denote that all variables entered in the model except labor force, have significant positive effect on the growth of agriculture. The valu of coefficients for two variables, the ratio of current and development expenditures to gross domestic product, which indicates the size of government in this study, have been estimated 0.1 and 0.6 suggests that an increase in government size can have a positive effect on the agricultural sector growth. Summing up the effects of these two variables shows that despite the pursuit of privatization policy in the country with the aim of reducing the size of the state, the agricultural sector is also affected by the government and its policies and the growing state can lead to the development of agriculture and consequently to growth within the country. In the model for estimation of development expenditures, current expenditures is more influential onthe agricultural sector growth .
Conclusion: The results of the study show that increasing the size of government can expand the agricultural sector growth of the country. Therefore, it is necessary to implement the policy of reducing government and reducing support on the agricultural sector gradually while taking into account all aspects. The rapid decline in government investments in this sector, especially in infrastructure investment, can reduce the growth and development of issues such as the spread of poverty and the migration of villagers. Also, as results, it is observed that the effect of development expenditures on agricultural sector is higher than current expenditures. This suggests that fixed investment and the creation of capital assets are considered as more powerful tools for the agricultural sector growth. The results of Beta convergence study indicate the convergence of agricultural sector growth among provinces of the country. By comparing two models with and without the government, although government policies and programs can increase agricultural growth, these policies have reduced the rate of convergence between the provinces. This means that the government's policies have not been successful enough to help poor provinces in the agricultural sector and the continued allocation of resources and facilities to the provinces could lead to more discrimination among the provinces. Therefore, it is suggested to focus on allocating and distributing state funds, facilities and agricultural infrastructure and services in balanced form with aim of reducing provincial imbalances.
Research Article
S. Jani
Abstract
Introduction: According to literature, economic growth and fair income distribution will result in poverty reduction. To realize fair income distribution and economic growth simultaneously, some scientists consider resource allocation among economic sectors and some others believe regions access to facility ...
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Introduction: According to literature, economic growth and fair income distribution will result in poverty reduction. To realize fair income distribution and economic growth simultaneously, some scientists consider resource allocation among economic sectors and some others believe regions access to facility will lead to realize the mentioned goals simultaneously. Current study shows that infrastructure improvement by providing deprived regions to access main economic activities and therefore earning opportunity will cause deprived regions inhabitants’ income to increase and income gap to decrease. Results of present study raise questions such as: ''How resource transfer among economic sectors in different regions may affect rural and urban income distribution depending on the amount of their amenity? "Does a special resource allocation among different economic sectors including resource transfer from industry and service sector to agriculture would cause rural income distribution improve?'' , ''“Is it possible to decrease rural and urban inequality together by insisting on a special rule of resource allocation among sectors? '' and ''Is this rule the same for both deprived regions and enriched regions?''
Materials and Methods: In this study the analysis focused on the relationship between resource allocation among economy’s main sectors (service, industry and agriculture) and the rural and urban income distribution in Iran separately in deprived provinces with amenity and semi-deprived provinces during (2007-2014) in the form of Panel data. The income inequality considered as function of economic sectors share (service, industry and agriculture) in the form of quantitative model, which examined by Dastidar (2012) and Kaya (2012) that is as follows:
(1)
In equation (1) G, Sha, Shi, Shs are rural Gini coefficient, agricultural, industry and service sector share of Gross domestic production (GDP), The Gini coefficient can be written in these ways:
Considering the linear relations among the factors, the above equations would be like these:
(2)
(3)
(4)
Each of the equations contains the share of the added value of two economic sectors. Since the total share of three economic sectors equals 100, share of the absent sector will be the residual of the remained share. Therefore, each sector’s share coefficients in the equation, which equals to the share of absent sector variation, explained as income inequality variation in economy. For example, in the first equation if which shows that a percent decrease in share of service sector, with the assumption that the share of other sectors be fixed, will increase the share of agricultural sector by one percent which consequently decreases the income distribution inequality about
Conclusion: The results for rural and urban regions of the provinces with low amenity indicate that production share shifting among economic sectors will affect inequality index significantly. Added value of service sector will be transferred to agriculture and industry and also added value of industry will be passed on agriculture which will cause urban and rural inequality reduction however shifting added value of industry to service sector will cause urban and rural inequality rise. These results show that agricultural sector development compared to service and industry sectors cause rural inequality reduction while industry sector’s development compared to service sector, which is due to the Kuznets theory, explain low inequality in agricultural sector. These results for deprived provinces and prosperous provinces mostly are not significant and result comparison for urban and rural regions show that service sector’s share transfer to agriculture in provinces with amenity or deprived is not effective on rural inequality but decreases the urban inequality. Also service sector share transfer to industry in deprived regions cause rural inequality decrease but has no effect on rural inequality.
In order to achieve economic growth and fair income distribution synchronic in provinces with low amenity boost in share of agriculture and industry will be advised. In addition, deprived provinces should be equipped with infrastructures to reach the prosperous provinces level and by transferring the source allocation like what before mentioned, improvement in rural and urban income distribution along economic growth will happen. However, for prosperous provinces source allocation among the sectors is not efficient so it is necessary to analyze the rules and institutions that are effective on income distribution in these regions. In other words, insisting on development of agricultural sector in regions where mostly poor groups are, amenity is not effective on rural inequality. While according to the previous studies agriculture development improve society’s income distribution. So in these regions it is necessary to analyze and consider the structures which are effective on rural income distribution and society.