Determinants of Intra-industry Trade Case study: Iran & Southwest Asian Countries

Subject Areas : Applied Economics

کریم امامی ¹ ( مسئول مکابتبات )
تیمور محمدی ² ( ندارد )
نفیسه شعبانی ³ ( ندارد )

Received: 2009-08-04 Accepted : 2010-02-09 Published : 2010-09-23

Keywords: Intra-Industry Trade, Grubel &amp, Lioyd Index, Gravity Model,

Abstract :

This paper is exploring the determinants of Intra-Industry Trade (IIT) between Iran and Southwest Asian countries. Within the framework of Gravity Model, we use Grubel & Lioyd index to measure the volume of IIT for Chemical products from 1992 to 2005. Based on theoretical studies, Country and Industry-Specific factors collectively determine the composition of Intra-Industry Trade among trade partners. Empirical studies however show that in developing countries, National fundamentals are more significant in the explanation for the pattern of IIT. Such elements are GDP, Demographic variable, Geographic Distance, Linder Variable, Economic Convergence, and Exchange rate. Our research confirmed that, GDP, Economic convergence, and the Linder Variable have positive effect on Intra-Industry Trade between Iran and its trading partners in Southwest Asia, whereas Exchange rate and Distance inversely influence IIT.