Oil Price Fluctuations and Household Welfare in Iran

Abstract

In this paper the impacts of oil price fluctuations on the household welfare for different income groups have been studied using computational general equilibrium model. Equivalent Variation (EV) criterion is also used to evaluate changes in household welfare. The results show that oil price fluctuation has a greater impact on income, expenditure and welfare of urban households compared with the rural ones. In other words, dependence of urban household income on oil price is stronger in comparison to the rural ones. It has also been revealed that an oil price increase is more effective than the price reduction on household welfare, income and expenditure. Ratio of EV to total expenditure is almost the same for the poor and rich households, implying that both of them suffer a percentage of welfare loss in the same way.

Keywords

• c68
• d58
• d58
• oil prices fluctuation
• cge model
• households welfare jel classification: c68
• l72