Examining Subsidy Polices on Maize Production in Iran (Panel Data approach)

Abstract

Among the agricultural important factors, inputs are the most significant in agricultural production. This article aimed to examine the impact of government subsidy policies on production of one of the most strategic products, namely on production of one of the most strategic products, namely maize, in Iran. To achieve this goal, panel data for the nine provinces of Iran's major producers of maize during the period of 1999-2007, is used. In this study, first the country's maize production function has been estimated by using data information for inputs: chemical fertilizer, labor, water, seeds and pesticides. And then, calculating the partial elasticity of production factors,sensitivity of production to changes in the value of inputs is evaluated. Also, using a methodology based on the maximum profit, inputs´ demand function is calculated.Results of analyzing government Subsidy Policy showed that, paying subsidy to chemical fertilizer decreases maize production 0.412 percent, because of low demand elasticity of this input. Also according to subsidy of seed, with regard to low demand elasticity of this input to its price, paying subsidy that decreases seed price, wouldn´t have so high effect on its consumption and consequently, on production growth, so that maize production only increased 0.478 percent due to paying subsidy to seed.