Application of Melitz Model in Investigating the Role of Productivity of Cement Manufacturing Firms in Cement Exports

Due to the importance of developing non-oil exports in the country, the industry sector is one of the important economic sectors that, through creating new job opportunities, meeting the needs of technology and machinery of other sectors, on the one hand, meet the basic and welfare needs of people. and on the other hand, it creates desirable institutional and social changes. Therefore, the place of the industry in achieving economic development is undeniable and prominent. So, in this study, the cement export market, which is one of the basic and strategic industries, has been studied. The purpose of this paper is to use the Melitz model to examine the effect of productivity along with financial variables (capital intensity and debt) and exchange rates on the export growth of Iranian cement manufacturing firms during the period 2003-2020. Thus, by the Solow model, panel data, FGLS method, first the productivity of each firm was calculated. Then, by PMG method, the short-term and long-term effects of firms’ productivity on the export growth of Iranian cement manufacturing firms were estimated. In the following the effect of firm financial structure and exchange rate variables along with firms’ productivity was estimated. The results show that productivity and other variables do not effect on the growth of firms’ exports in the short run, but in the long run, productivity and other effective factors have had a significant effect on the export growth of firms. Therefore, productivity is a necessary and not sufficient condition for the export of firms’ cement in Iran. Also, considering a productivity threshold for Iraq as the most important destination country of Iranian cement among other countries, existence positive relationship between productivity higher than the threshold of cement exporters and their exports to Iraq indicates the application of the Melitz model in Iranian cement exports.