Dynamic Effects of Accession to the WTO on Industrial Sector in Iran: Application of the RDCGE Model

The present study aims to analyze the long-term impact of tariff reductions to be mandated in the event of accession of Iran to the World Trade Organization (WTO) on the industrial sector using the Recursive Dynamic Computable General Equilibrium (RDCGE) model. For this purpose, the model was calibrated for the 2011 social accounting matrix of Iran. In the baseline scenario, it was assumed that the Iranian economy will experience annual growth of 2% without accession to the WTO, which is the same rate as the population growth. In the alternative scenario, the tariff reduction simulation was performed based on the average tariff commitments of 22 developing countries acceded to the WTO. Based on the results, industrial production and exports will shrink by 3.4 and 3.5%, respectively, over the 30 years after joining the WTO, leading to an 81% gap between the production levels in the alternative and baseline scenarios at the end of this period.