Document Type : Research Paper
Authors
1 Assistant Professor, Department of Economics, Payame Noor University, Tehran, Iran
2 Associate Professor, Department of Economics, Allameh Tabataba'i University, Tehran, Iran
Abstract
Export diversification remains a pivotal theme in international trade literature. Statistical evidence indicates that the export baskets of developing economies are predominantly composed of traditional commodities. Consequently, these nations strive to diversify their export portfolios by incorporating a broader range of manufactured goods. This imperative is particularly acute for oil-exporting developing countries, where diversification is essential to mitigate the economic risks associated with high export concentration in the hydrocarbon sector.
Producing a diversified range of goods is often technology-intensive—a capability that firms in many developing nations frequently lack. Access to a wider variety of imported intermediate and capital inputs—characterized by competitive pricing and superior quality—can play a crucial role in bolstering export competitiveness. These imports facilitate productivity enhancements, reduce production costs, and improve product quality. Given the significance of this issue, elucidating the role of technology spillovers embodied in imported intermediate and capital goods and examining their impact on export diversification are vital for formulating effective industrial development strategies.
This study aims to determine whether the importation of intermediate and capital goods exerts a positive and significant impact on Iran's export diversification. To this end, the research employs a panel data model using data from Iranian manufacturing industries at the two-digit ISIC level for the period 2006–2021 (1385–1400 SH). Furthermore, the study conducts a granular analysis of how these imported inputs affect export diversification across specific industrial sub-sectors.
Method and Material
This study investigates the determinants of industrial export diversification in Iran from 2006 to 2021, with a specific focus on imported intermediate and capital goods. The analysis utilizes a panel data model based on Iranian industries classified at the two-digit level of the International Standard Industrial Classification (ISIC), Revision 4.
To quantify the impact of imported inputs on industrial export diversification ( ), the following econometric specification is estimated:
In Equation (1):
denotes export diversification;
is the real effective exchange rate (defined as );
and represent imports of intermediate and capital goods, respectively;
denotes research and development expenditures;
indicates the degree of economic openness; and
represents the Gross Domestic Product per capita.
The export diversification index for two-digit industries is calculated using the Theil index, as shown in Equation (2):
Here, represents the exports of the industry with the -th four-digit code in period . Consequently, denotes the total exports of the two-digit industry.
The real exchange rate ( ) is calculated using Equation (3). The data comprises the official exchange rate, the Producer Price Index (PPI) disaggregated by Iranian industries, and the value-added deflator of U.S. industries (as a proxy for foreign prices), with 2015 as the base year.
Data for imported intermediate goods is derived from the value of foreign raw materials, packaging supplies, and non-durable tools. Data for imported capital goods is obtained from the purchase or acquisition of foreign capital assets. The Research and Development (R&D) variable is sourced from statistics on research and laboratory expenditures, disaggregated by industry. These data were extracted from the Statistical Center of Iran's database on industrial establishments with 10 or more employees across 23 distinct industries. GDP per capita was retrieved from the World Bank. All nominal variables were deflated using the industry-specific Producer Price Index (PPI) with a base year of 2015.
The degree of economic openness is calculated as per Equation (4):
Consistent with theoretical foundations, it is expected that all variables, except the real exchange rate, will have a positive impact on Iran's industrial export diversification.
Results
The empirical estimation results, reported in Table 3, indicate that imported intermediate and capital goods have a positive and statistically significant impact on Iran's industrial export diversification. Specifically, a 1% increase in the imports of capital and intermediate goods is associated with increases in export diversification of 0.01% and 0.036%, respectively. Furthermore, GDP per capita and economic openness exert a positive and significant influence on diversification. Conversely, the real exchange rate and R&D expenditures exhibit a negative impact on industrial export diversification.
For a more comprehensive analysis, the impact of imported inputs was examined at a disaggregated level across two-digit industry codes. The results in Table 4 reveal significant heterogeneity across sub-sectors. Notably, the elasticity of export diversification with respect to capital goods imports is highest in the Manufacture of food products industry (coefficient = 0.02). Similarly, the impact of intermediate goods imports peaks in the Manufacture of beverages industry (coefficient = 0.15). However, in the Manufacture of tobacco products and the Manufacture of pharmaceuticals, medicinal chemical, and botanical products, the effect of these imported inputs on export diversification is statistically insignificant.
Conclusion
This study examined the influence of imported intermediate and capital goods, along with other factors, on industrial export diversification in Iran from 2006 to 2021. The analysis utilized a panel data model employing data from Iranian industries at the two-digit ISIC level.
The empirical findings demonstrate that imports of both intermediate and capital goods exert a positive and statistically significant impact on the export diversification of Iran's manufacturing industries. Furthermore, disaggregated analysis indicates that the magnitude of this effect varies across different industrial sub-sectors. Consequently, trade strategies should prioritize facilitating the importation of intermediate and capital goods.
Moreover, support policies regarding these inputs should be designed in a targeted, sector-specific manner to maximize industrial development.
Keywords
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