Author:
Ahmadian Majid,Chitnis Mona,Hunt Lester C.
Abstract
AbstractThis study estimates the gasoline demand function for the Islamic Republic of Iran, using the structural time series model over the period 1968‐2002, and uses it to estimate the change in social welfare for 2003 and 2004, of a higher gasoline price policy. It is found that short‐ and long‐run demand price elasticities are inelastic, although the response is greater in the long run. Hence, social welfare is estimated to fall because of the higher gasoline price (ceteris paribus). However, allowing all variables in the model to change, social welfare is estimated to increase since the changes in the other variables more than compensate for the negative effects of the policy.
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