Economies of Scale of Household Consumption Expenditure in Iran

Document Type : Original Research

Authors
S. Mehrjou
M. Bakhshoodeh
Department of Agricultural Economics, School of Agriculture, Shiraz University, Shiraz, Islamic Republic of Iran.
10.22034/JAST.27.1.17
Abstract
Household-scale economies can be plausibly attributed to shared household public goods that make larger households better off at the same level of per capita resources. This paper examines the role of food and housing in the allocation of Iranian household expenditure, considering co-residence and economies of scale. Using a seemingly unrelated regression model for 2011 and 2021, we predict that, in the presence of shared food and housing, our method (solely) exploits preference information revealed by a cross-section of household observations while accounting for fully unobserved preference heterogeneity. Our findings indicate that scale economies changed significantly from 2011 to 2021 for expenditure categories of food and housing, but not all trends in scale economies are consistent with theoretical predictions. The results show that economies of scale are recognized to be higher in the housing group than in the food group in both periods. However, it has decreased within a decade and intensified due to the lack of appropriate government policy. In this context, the government's policies to encourage population growth have failed, and the population has encountered a low growth rate. Thus, providing support and welfare policy packages such as increasing income policy and household support insurance, as well as assistance in providing housing, are prioritized due to the economies of scale in housing.

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Journal of Agricultural Science and Technology
Volume 27, Issue 1
January and February 2025
Pages 17-30