Analysis of the Factors Affecting the Iran's Intra-industry Trade Convergence with Selected Regional Blocks (Gravity Model Application)

In this paper we revisited the recent contribution study examines the determinants of Intra-Industry trade(IIT) in the Agriculture, Industry and service sectors between IRAN and European Union, D8, OIC, ECO, GCC and ASEAN countries in the period 1980- 2009, using a dynamic panel data. This study uses country-specific characteristics as explanatory variables. The results indicate that IIT is a negative function of the difference in GDP per capita between IRAN and her trade partners. Statistically strong evidence is also found that this trade is influence by the similar demand. We also introduce an economic dimension; this proxy confirms the positive effects of IIT. This result reveals the importance of scale economies and the variety of differentiated products. Our results also confirm the hypothesis that trade increases if the transportation costs decrease.