An Examination of Endogenous Protection with Emphasis on Types of Intra Industry Trade: A Case Study for Iran's Manufacturing Industries

Since the 1970s, international political economic theorists have emphasized on the role of domestic factors, such as domestic active groups, policies and macro-economic indicators, to explain the trade protection trends. Empirical studies have often verified this view. This paper examines the determinants of tariff protection in Iran’s manufacturing industries by using panel data for the period 2001-2007.This research also investigates the effects of intra industry trade on tariff protection. The results indicate that value added and the ratio of production to import affect the tariff protection in Iran’s manufacturing industries. Also, intra-industry-trades and their type, i.e. horizontal and vertical intra-industry trade, have negative effects on the protection. Based on the obtained results, we suggest that domestic industries activities in both domestic and foreign markets as well as intra-industry trade and competitiveness of trade should be increased.