Effect of Income Inequality on Demand for Grain Imp ort in Iran

Abstract

Among the food products, grains play an important r ole in the consumption patterns of people, especially in the developing countries. Sin ce Iran's main source of public dietary energy comes directly from grains, investigating an d identifying the determinants of import of these products can be an important step t owards food security. Most experimental studies consider import of grains as o nly a function of relative prices and real income, whereas, income inequality is also a v ariable affecting the import of grains. The present study evaluates the effect of income in equality on the import of grains in Iran's economy during the years 1969-2009. For this purpose, the relationship of grain import with gross domestic production (GDP), grain production, real exchange rate, and income inequality was evaluated for Iran by using t he Vector Error Correction Model (VECM). The results indicate that the relationship between income inequality and grain import is positive and its coefficient is +0.55% . This implies that 1% increase in income inequality increases grain import by 0.55% . Also, the effect of gross domestic production on grains import is positive and the real exchange rate and grains production variables have a negative and significant effect on grains im port. Keywords: Grain, Gross domestic production, Real exchange ra te, Vector error correction model (VECM).