Evaluating the Production Variations due to Gasoline Price in Iranian Economic Sectors: Comparison of the Standard and the Nonlinear Ghosh Supply-Driven Models

Document Type : Original Article

Authors

1 Associate Professor of Economic, Faculty of Economics, Allameh Tabataba’i University, Tehran, Iran

2 MA in Economic, Faculty of Economics, Allameh Tabataba’i University, Tehran, Iran

10.29252/jem.2023.230976.1830

Abstract

The use of linear production functions in the structure of input-output model is one of the basic limitations of these models. The study, while eliminating the shortcomings of the standard supply-driven Gosh model by replacing the linear production function with the Cobb–Douglas production function in the supply-driven input-output model and introducing a nonlinear model, it compares the effects of rising gasoline prices on two standard linear models and a nonlinear supply-driven models. For this purpose, the input-output table of 2,016 of the Central Bank of the Islamic Republic of Iran has been employed to extract the non-linear supply-driven input-output model. Also, to calculate the value-added changes due to the increase in gasoline prices, gasoline subsidy figures in the hydrocarbon balance sheet in 2016 have been used. The results of this study show that in both models, due to the increase in gasoline prices, the production cost of all sectors increases, but the rate of increase in production costs in the standard supply-driven model is more than non-linear supply-driven model. The reason for this result is the possibility of substitution between inputs in the non-linear supply-driven model.

Keywords

References

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