Analyzing Country Specific Determinants of Iran's Intra-Industry Trade

In this paper, some of the various sources of intra industry trade described in the literature are combined in a panel regression analysis to determine if these proposed behavioral causes could be empirically verified. The dependent variable is Grubel & Lloyd index. The index is measured at the 6-digit level of harmonized commodity description and coding system in the period 1997-2001. The results of our econometric study support the hypotheses put forward in literature as far as the common characteristics of the countries in question are mostly concerned. Thus, the regression coefficients of the average gross national income, income inequality, average country size, inequality in country size and distance, all have the expected sign and are statistically significant in 10 percent level in the fixed effect model. The trade imbalance coefficient has its expected negative sign and is statistically insignificant.