The Features of Vertical Intra - Industry Trade: Panel Data Approach

Inter industry trade (IIT) is simultaneous import and export of commodity and services which have been categorized in a similar industrialized group. IIT deals two parts including horizontal and vertical IIT that are defined by trading of yields which are similar and different in qualification, respectively. Vertical IIT in Iran is about 80/92% of whole IIT, so this paper is focused on it. This study has analyzed the vertical IIT specifications by Grubel and Lloyd between Iran and several important trading partners (such as china, South korea, United arabic emirates, Japan, Turkey, Malaysia and Singapore) via panel data approach at (1997- 2004). The finding results of this paper without considering fixed effects indicates that there is positive relation between vertical IIT levels and GDP and also between the differences of per capita GDP and geographical interval between Iran and selected countries. Therefore, these three variables can be the determinant factors of vertical IIT but by considering fixed effects method, the obtained coefficient for geographical interval is inconsistent with theory which might being lead by structure of transportation network. Findings of this paper can help to shed light on Iran trading policy procedure.