Determinant factors of vertical intra industry trade in agricultural sector: A study of Iran and her main trading partners

Abstract

The present study has investigated the country specific determinants of the vertical and total intra-industry trade between Iran and its main trading partners (including 24 countries) in the agricultural products group during the time period 2001–2007. For this purpose, first we have measured the types of the intra-industry trade. Then we have examined the determinants of the vertical and total intra-industry trade in the agricultural sector by using the panel technique. Based on the obtained results, it has confirmed that economic development (both per capita income and HDI) has a positive and significance effect on the Iran’s bilateral intra-industry trade. Also, the results verify the Linder hypothesis. In sum, the Iran’s foreign trade in agricultural sector is mainly based on comparative advantage. Specifically, there is a negative and significant relationship between the revealed comparative advantage and the industry trade. In addition, the endowment of land affects positively the high vertical intra-industry trade. Also according to the results, the size market differences impact the intra-industry trade negatively.