Document Type : Research Paper
Authors
1 Associate Professor, Faculty of Economics, Allameh Tabataba’i University, Tehran, Iran
2 Computer Engineering student, Faculty of Statistics, Mathematics and Computer, Allameh Tabataba’i University, Tehran, Iran
Abstract
This study investigates the decomposition of value-added in Iran’s gross exports with a focus on its trade relations with key global economic groups, particularly BRICS and Shanghai Cooperation Organization (SCO) member countries. To achieve this, four major decomposition methods are applied, namely those proposed by
Koopman et al. (2014), Wang et al. (2013), Miroudot and Ye (2021), and Borin and Mancini (2023). The study emphasizes the Borin and Mancini (2023) framework, which is source-based and exporter-oriented. By incorporating Iran into the 2016 Inter-Country Input-Output (ICIO) database through national input-output data, this paper offers an empirical analysis of Iran’s integration in global value chains (GVCs). The results highlight that Iran’s participation in GVCs is extremely limited, both in upstream and downstream linkages.
Introduction
Since the 1990s, global trade has increasingly been structured around global value chains, where intermediate and final goods cross borders multiple times. Traditional trade statistics are insufficient in capturing the true economic contributions of each country within these chains due to double counting. This issue is particularly relevant for Iran, where understanding the sources and destinations of value-added is crucial for policy design. By leveraging inter-country input-output (ICIO) data, this study examines Iran’s export value-added structure and its relation to major global economic blocs.
Methodology
The paper utilizes the 2016 ICIO table, augmented to include Iran, which provides a detailed 42×42 sector-country matrix. Value-added decomposition is conducted using four distinct frameworks, differentiating between domestic value-added (DVA), foreign value-added (FVA), returned value-added (RVA), and double-counted components (DDC and FDC). Emphasis is placed on Borin and
Mancini’s (2023) source-based decomposition, using the Exvatools package and bilateral trade flow analysis.
Results and Discussion
Iran’s total gross exports in 2016 amounted to $97.3 billion, of which 88.9% was domestic value-added and 11.1% was foreign value-added. The VAX (exported and absorbed domestic value-added) component accounted for 88.6% of exports, while the returned value-added (RVA) was just 0.2%. In comparison with BRICS and SCO countries, Iran’s foreign value-added content was significantly lower, suggesting weak upstream integration. Similarly, the double-counted content (DDC and FDC) was minimal, indicating limited engagement in multistage international production processes. Iran’s major trading partners absorb the majority of its exported value-added, while very little is returned or cycled through multiple stages. Furthermore, import-side decomposition showed that most of Iran’s imports are final goods rather than intermediate inputs.
Conclusion
The findings confirm Iran’s marginal role in global value chains, with high reliance on domestic inputs and minimal participation in cross-border production fragmentation. This limited integration was more pronounced when compared to countries like China, Korea, and Turkey. To enhance Iran’s role in GVCs, policy measures should focus on reducing dependence on imports of final goods, boosting intermediate goods production, and fostering industrial linkages with BRICS and SCO countries. Incorporating such insights into trade and
industrial policy could help mitigate vulnerability to external shocks and promote sustainable economic growth.
Keywords
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