Effect of Land Transport Infrastructure of the ECO Regionon the Intra-Regional Trade of Iran

It goes without saying that the insufficient transport infrastructure and the inefficient services will directly affect the costs and the time needed for goods to reach destination. An improvement and progress in the country`s infrastructure can make a big difference in the costs of trade. Studies show that a 10 percent increase in the transport costs (largly due to poor infrastructure) has caused a 20 percent decrease in trade.This article tries to quantify the effects of transport infrastructure (rail and road) in the ECO region on the regional trade activities of Iran with other members of the organization. We hypothesize that there is a meaningful and positive relationship between the transport infrastructure and the flow of trade. Utilising panel data and the gravity model, the article shows that the volume of trade will decrease if the transport costs (geographical distance) increase, and the availability of the transport infrastructure increases the flow of trade