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The Emergence of Iran in the World Car Industry: An Estimation of its Export Potential

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  • Javad Abedini
  • Nicolas Péridy

Abstract

In the past 10 years Iran has been emerging as a major car producer in the world. However, due to delays in economic reforms, Iranian car exports have not increased as much as production. This paper presents a first estimation of the Iranian export potential in the car industry. Based on new theoretical developments of the gravity equation, an empirical bilateral trade model is proposed. It includes sectoral variables (car production, import tariffs), as well as other original variables, such as expectations and hysteresis. We then develop a dataset which includes the 40 major car-exporting countries in the world, 34 importing countries, a 10-year time period as well as four car production groups. The model is then estimated by using alternative panel data estimators, such as those of Hausman and Taylor and dynamic estimators as well as transformed variables estimators. Export potential is finally calculated from the residuals of the model. Results show that Iranian current car exports are about 100 times less than their fitted values. This indicates that there is a significant export potential for Iran, especially toward India, China, Russia, as well as smaller neighbours (Turkey, Pakistan, Central Asian countries). As a result, Iran could become the major auto supplier in the Middle East. However, this requires the completion and success of ongoing economic reforms. Copyright 2009 The Authors. Journal compilation 2009 Blackwell Publishing Ltd.

Suggested Citation

  • Javad Abedini & Nicolas Péridy, 2009. "The Emergence of Iran in the World Car Industry: An Estimation of its Export Potential," The World Economy, Wiley Blackwell, vol. 32(5), pages 790-818, May.
  • Handle: RePEc:bla:worlde:v:32:y:2009:i:5:p:790-818
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    Cited by:

    1. Ebrahim Soltani & Jawad Syed & Ying-Ying Liao & Abdullah Iqbal, 2015. "Managerial Mindsets Toward Corporate Social Responsibility: The Case of Auto Industry in Iran," Journal of Business Ethics, Springer, vol. 129(4), pages 795-810, July.
    2. Khan, Rana Ejaz Ali & Khan, Tasnim & Maqsood, Muhammad Farqan, 2010. "Export potential of cottage industry: a case study of Sialkot (Pakistan)," MPRA Paper 34427, University Library of Munich, Germany.
    3. Mojgan Bahrami Samani Author_Email: Samani_518@yahoo.com.sg & Ali Attafar & Naser Khani Khouzani, 2011. "A Conceptual Model For Iran’S Car Industry Customers’ Loyalty," 2nd International Conference on Business and Economic Research (2nd ICBER 2011) Proceeding 2011-184, Conference Master Resources.
    4. Peridy Nicolas J & Abedini Javad, 2008. "The Growing Influence of Emerging Countries in the World Car Industry: An Estimation of Export Potentials in a World Trade Model," Global Economy Journal, De Gruyter, vol. 8(3), pages 1-28, September.

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