The Effects of Globalization on Saffron Production: A Focus on Iran's Agricultural and Rural Policy Framework

Abstract

Objective: In the economies of developing countries, the agricultural and rural sector holds particular significance. Saffron is a high-value crop that not only commands global importance but also aligns well with Iran’s climatic and agricultural conditions. This study aims to investigate the impact of globalization on saffron production within the context of Iran's broader rural and agricultural policy framework. Methods: To achieve the research objectives, the Vector Error Correction Model (VECM) was employed. The data used in this study spans the period from 1979 to 2023. Findings: The Vector Error Correction Model revealed a positive long-term relationship between exchange rate fluctuations and saffron production (coefficient = 2.08). As the exchange rate increases, saffron prices rise in importing countries, leading to higher domestic production and increased export volumes. In the short term, the exchange rate with one- and two-year lags shows a direct effect on saffron output—specifically, a 1% increase in the exchange rate leads to more than a 1% increase in saffron production. Conclusion: Given Iran's agricultural and rural development policies, the process of globalization has had a positive influence on saffron production. Under globalization, investments directed toward saffron cultivation have increased, while new and cost-effective technologies and inputs have been adopted by farmers. Moreover, the government plays a significant role in shaping the performance of the saffron sector through various policy areas such as trade regulations, financial systems, exchange rates, banking, foreign investment, insurance, labor laws, competition regulation, corporate governance, domestic industry development, technology transfer, education, health care, and social services. Ultimately, transitioning from a closed economic system to an open economy becomes feasible under these conditions.