Volume 5, Issue 17 (7-2005)                   refahj 2005, 5(17): 119-136 | Back to browse issues page

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Taghavi M. The Relative Income Gap and The Deviation in Iran International Business Affairs. refahj. 2005; 5 (17) :119-136
URL: http://refahj.uswr.ac.ir/article-1-2116-en.html
Abstract:   (2023 Views)

Traditional trade theories argued that absolute or relative or comparative advantages are basis of trade. Each country will specialize in producing goods in which she has absolute or comparative advantage. H.O. Theory argued that factor abundance determines the commodities that each country produces, exports or imports. Linder theory states that similarity of demand determines the pattern of commodity export and import of a country. In his opinion the best index for similarity of demand is per capita income. So if the gap between two countries per capita income increases, trade between these two decreases and vice versa. Our aim in this paper is to investigate this hypothesis for Iranian economy. To do so we have used three methods. Two simple methods and another one which is more advanced. First we divided the intended time period for which we test Linder hypothesis into two sub-periods. The first one covers years 1974-1987 and the second covers years 1979-2002. In our first method we show that in the first sub-period most of 10 top trade partners of Iran were. Industrial and advanced countries of Western Europe and USA in second sub-period these were replaced by Asian countries. In second method we show that compared to the first sub-period in the second one share of Asian countries in trade with Iran has increased and share of advanced countries with Iran has decreased. In third motheod, panel data Regression fixed effect method, we found that the coefficient of independent variables in both regression equations (Iran and Europeans… Iran and Asians) are negative. This shows that increase in income gap with Europeans has decreased Iran’s trade with them and decreased in income gap with Asian has reduced Iranian trade with them. So we can not reject Linder hypothesis for Iranian economy

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Type of Study: orginal |
Received: 2015/09/10 | Accepted: 2015/09/10 | Published: 2015/09/10

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