Investigating the Effect of Product Relatedness on Iranian Agricultural Exports

Foreign trade is a critical component of economic development, particularly for developing countries. Over recent years, product relatedness has turned into an emergent factor in international trade. According to empirical findings from various studies, this factor can alter the business models of different countries. In this regard, this study aimed at investigating the effect of product relatedness on Iran's agricultural exports and selected countries. For this purpose, the comparative advantage index and the proximity index were used to investigate the countries' specialization and similarities between products, respectively. The gravity model and the Poisson Pseudo Maximum Likelihood (PPML) method were also used to determine the effect of variables between 2001 and 2018. The gravity model results indicated the significant effect of the product relatedness variable on increasing the trade of Iranian agricultural products. It was also found that the per capita income and population of trading partners had a significantly positive effect on Iran's agricultural exports, while the effect of geographical distance was significantly negative. According to the findings, exporters are suggested to concentrate on close target markets with a high per capita income and a high level of product relatedness.