Measuring the Export Efficiency of Iran’s Pistachio Using Stochastic Frontier Gravity Model

International trade leads to financial and economic development by improving domestic productivity. Given the importance of trade, various trade topics such as intra-industry trade, trade survival, trade balance and trade liberalization have been examined in the research literature. One of the most important trade concepts received less attention is export efficiency. The export efficiency is defined as the ratio of actual exports to the maximum export potential in the destination markets. Pistachio is one of the important products in Iran’s agricultural exports. The share of Iran’s pistachio exports has dramatically decreased from 58 percent in 2000 to 24 percent in 2016. Despite the importance of investigating the exports efficiency in planning and policymaking, there is no empirical study about the measuring pistachio exports efficiency. So, this paper aims to assess the main determinants of pistachio exports of Iran and evaluate the export efficiency in the main destination countries

 In this study, the stochastic frontier gravity model is employed for investigating the Iran’s pistachio export efficiency in its importing countries. The gravity model is a well-known tool by international trade economists which explains trade flows between two trading countries based on economic size and geographical distance. The analysis is based on panel data covering 42 trading countries during 2001-2016. The selected countries are Australia, Bahrain, Belgium, Bulgaria, Canada, China, Cyprus, Czech Republic, Egypt, France, Germany, Greece, Hong Kong, Hungary, India, Iraq, Italy, Japan, Jordan, Kazakhstan, Kuwait, Lebanon, Luxembourg, Malaysia, Mexico, Netherlands, Pakistan, Poland, Qatar, Romania, Russia, Saudi Arabia, Slovakia, Spain, Sweden, Switzerland, Syria, Tunisia, Turkey, Turkmenistan, United Arab Emirates and United Kingdom.

The results of Fisher and IPS (Im, Pesaran and Shin) panel unit root tests clearly show that all the variables are stationary. The results of Chaw and Hausman tests indicated that fixed effect model is the best model. The coefficient of Iran’s GDP carries a positive sign on its coefficient and is consistent to expectations. The coefficient of importers’ GDP carries the expected positive sign on its coefficient and is highly statistically significant at 1 percent level, indicating that higher GDP has translated into higher demand and so higher imports. The coefficient of the variable geographical distance is as expected negative and statistically significant at 10 percent level. This means that distance play an impeding role in pistachio exports from Iran to its importers. The coefficient of the variable per capita GDP difference as a proxy of economic difference is positive and significantly statistically at 10 percent level. This shows that pistachio export from Iran to its importing countries with different economic structure is higher compared to importing countries with similar economic structure.According to the results, the coefficient of the dummy variable for regional trade agreement is positive and statistically significant at 5 percent level. This indicates that membership of Iran and its partner in same agreements has significantly affected Iran’s pistachio exports to its importing countries. The coefficient of the dummy variable for common border is positive and highly statistically significant at 1 percent level indicating that common border between Iran and its partner led to same food-style and lower transaction cost which have increasing effect on Iran’s pistachio exports. The coefficient of dummy variable for high income is positive and significant at 10 percent level, suggesting that Iran’s pistachio exports to high income countries is higher compared to other countries. The coefficient of dummy variable for global economic crisis is negative and highly statistically significant at 1 percent level. This means that economic crisis led to decrease demand for unnecessary food. The coefficient of dummy variable for economic sanctions is negative and highly statistically significant at 1 percent level, showing that economic sanction led to decreasing supply from Iran to its importing countries particularly EU countries.Based on the efficiency results, none of the country showed100% technical efficiency. Also, the average of Iran’s export efficiency has decreased in all destination markets over the period 2001-2016. In the panels of Asia and Europe as important destination regions, Iran’s export efficiency has increased and decreased respectively.

According to the empirical findings, there is a lot of potential in order to increase Iranian pistachio exports to destination countries. Therefore, due to the positive and significant effect of common border, it is suggested that trading countries with same border (land or sea border) should be a top priority for pistachio exports. Also, based on the positive effect of regional trade agreement, it is recommended that exporters be granted through access to larger and safer destination markets by joining larger trade agreements.