Effect of Total Factor Productivity on Intra Industry Trade of Iran's Manufacturing Industries

Despite of paying special attention of traditional trade theories to productivity، but this important subject has been less taken into account by new trade models. In this framework، present paper has examined the impact of total factor productivity on intra industry trade. For this، based on the very latest data، trade and industry specific data of 16305 firms with above 10 workers have been measured، collected and processed at the 4 aggregation level of ISIC classification during 2003-2007. The results obtained from the panel data estimations show that total factor productivity has a positive and significant effect on intra industry trade of Iran’s manufacturing industries. According to the other results، product differentiation and scale economies have positive and significant effects on the intra industry trade. In the framework of the obtained results، we suggest that it should be paid attention on total factor productivity and production development of the industrial sector as well as the factors affecting on intra industry trade.