Factors Affecting Intra-industry Trade Between Iran and Regional Blocs

اقتصاد و توسعه منطقه ای

Article 7, Volume 21, Issue 8, February 2015   

Document Type: مقالات پژوهشی

DOI: 10.22067/erd.v21i8.43932

Author

Amir Reza Soori^*

Abstract

Abstract
In this paper, we analyze the determinants of Intra-Industry trade (IIT) in the Agriculture, Industry and service sectors between Iran and her trading partners, i.e. European Union, ECO, GCC, D8, OIC and ASEAN countries using dynamic panel data and GMM during 1980-2009.
This study uses country-specific characteristics such as economic size, per capita income, foreign direct investment, geographical distance, and trade imbalance as explanatory variables. The results indicate that economic size, per capita income, and geographical distance explain most of IIT between Iran and her trading partners. According to econometric findings, the economic size has high and positive correlation with IIT, however per capita income affects negatively IIT. Thus, differences in aggregate demand and supply should be considered in selecting trade partners. The similarity in income structure leads to same demand structure and expansion of trade volume. In addition, geographical distance and trade imbalance has negative effect on IIT flow in Iran.

Keywords: Intra-industry Trade, Regional blocs, Dynamic, panel data, Economic scale, GMM

JEL Classification:C20 , F12.

Keywords

Intra-industry Trade; Regional blocs; Dynamic; Panel Data; Economic scale; GMM

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