Factors affecting the intra-industry trade in agriculture between the Islamic Republic of Iran and regional blocks

The paper applies the Generalized Method of Moments to a dynamic panel data to analyze the intra industry trade in agriculture and food processing between the Islamic Republic of Iran and certain regional blocks such as the EU, ECO, GCC and ASEAN during the period 1980 to 2009. Country-specific characteristics are used as explanatory variables. The results indicate that the intra industry trade is negatively related to the GDP per capita of Iran compared to those of the blocks. The size of the economies has a positive effect on the volume of intra industry trade. The conclusion is that the countries should consider the size of the economy of their trade partner because the larger the economy of the trade partner, the higher shall be their intra industry trade, resulting in a greater share of trade in the two economies.