Investigating the Factors Affecting the Trade of Agricultural Products Between Iran and Russia using the Gravity Model

Extended Abstract

Introduction and

The agricultural sector is one of the most important economic sectors in every country, which in Iran has significant advantages such as land diversity, cheap labor, and less need for complex technology to produce all kinds of products in different seasons of the year. Therefore, it,s maded strengthening is essential for economic development, employment, and increasing non-oil exports. This article investigates the factors affecting the trade of agricultural products between Iran and the Russian Federation using the gravity model.

First, necessary statistics and information were collected from the websites of the Central Bank and the World Bank for the period from 2010 to 2020. Then, in order to investigate the influencing factors on the volume of bilateral trade of agricultural products of Iran and Russia, the generalized gravity model was used. Before estimating the model, first the reliability of the variables was checked through the Levin-Lin and Chu test, and then the gravity model was estimated using the panel data method. In this study, the data were used separately for the export sector, once for import and finally for the whole trade (exports + imports) to determine the effects of different variables on each sector. Then, the Hausman test results were analyzed to select the most suitable part for analyzing the results.

The results of Levin-Lin and Chow tests showed that all variables were significant and panel data were static. The estimated results of the gravity model for the three sections under study are statistically significant based on F-statistics. Therefore, the null hypothesis is rejected, indicating that the intercepts are different from different time periods and panel data should be used. The results of the Hausman test for exports, imports, and trade were calculated as 0.214, 0.4359, and 0.000 respectively, based on which trade estimation was selected for analyzing the results. Estimating the gravity model for trade indicated that the coefficient of the variable Gross Domestic Product (GDP) of both countries, which represents their economic size, is an important factor in the bilateral trade volume of agricultural products between Iran and Russia. Also, distance, real exchange rate, and virtual variable of membership in the Eurasian Economic Union are the effective factors in the bilateral trade volume of agricultural products between Iran and Russia.

Generally, increasing the Gross Domestic Product (GDP) of both countries leads to an increase in bilateral trade of agricultural products between Iran and the Russian Federation. Therefore, it is suggested that measures be taken in the decision-making of policy makers in the field of membership in organizations and commercial agreements, especially in the field of agriculture.