The Impact of Sanction on Bilateral Intra-Industry Trade between Iran and SCO Countries

Abstract

This paper analyses the impact of sanctions against Iran in addition to other country-specific determinants on intra-industry trade between Iran and Shanghai Cooperation Organization (SCO) countries over the period 1997-2013. By disentangling total intra-industry trade (IIT) into horizontal and vertical IIT and after investigating bilateral trade pattern between Iran and SCO countries, determinants of IIT, horizontal IIT and vertical IIT are assessed using fixed effect panel data. Using panel data model, two main findings are released. First, trade barriers indicators and difference in factor endowments are crucial in determining of IIT indicators. Second, sanction index does not have significant impact on IIT measures.