Determinant factors of the vertical intra-industry trade in agricultural sector: A study of Iran and its 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.