Investigating the Roles of Institutions and Infrastructure on Iran’s Bilateral Trade with Main Trading Partners

Institutions and infrastructure as a set of social factors, rules, beliefs and infrastructure services are the key factors influencing bilateral trade between countries. So, this study investigates the effects of institutions and infrastructure on Iran’s bilateral trade with the main trading partners. For this purpose, gravity model, poisson pseudo maximum likelihood was developed and the analysis was based on panel data of trade volume between Iran and the trading partners over the period 2003-2016. The results implies that the interaction effect of different institutional indicators on Iran's bilateral trade with developing country partners and developed country partners are negative and significant. So that, Iran tends to trade more with less corrupt countries, higher political stability, implementing trade facilitation laws and more democracy. The positive and significant impact of the different institutional distance indicators on Iran's bilateral trade with developing country partners and developed country partners confirm that Iran tends to trade more with the partners that have stronger institutions. Moreover, the positive and significant effect associated with transport and communications infrastructure on Iran's bilateral trade with developing country partners and developed country partners indicates that the infrastructure facilitates trade between Iran and the main trading partners.