Reform of Energy Subsidies, Technological Change and the Energy Consumption Phase in the Iranian Economy

Document Type : Research Paper


1 Associate Professor, Faculty of Economics, University of Tehran

2 Professor, Faculty of Economics, University of Tehran, Email:

3 Assistant Professor, Faculty of Economics, University of Tehran,


The reform of energy subsidies has affected economic growth, as a result of household and firms’ behavior. However, despite the energy consumption and economic growth decrease in the short run, it is expected that economic growth will increase as a result of an adjustment in economic agents’ behavior over the mid- and long-terms. As is appropriate with these changes, energy consumption will change differently. In this paper, we modeled the adjustment in economic agents’ behavior through a dynamic CGE approach. In this model, we identified phases of energy consumption at both the final and intermediate consumption stages in different scenarios. The results showed that, in all the chosen scenarios the consumption of oil and energy products have a strong response to the reform of energy prices in comparison with other types of energy. In addition, the growth of energy consumption in all the scenarios would increase slowly in comparison to economic growth. Also, the Iranian economy would return to its normal phase over the middle-to long-run. Therefore, preparing the conditions for a speedy adjustment in agents’ behavior can decrease the negative effects of energy price reform on economic growth.


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Volume 49, Issue 4 - Serial Number 4
January 2015
Pages 799-833
  • Receive Date: 19 May 2013
  • Revise Date: 18 March 2015
  • Accept Date: 30 September 2014
  • First Publish Date: 22 December 2014