An Application of Stochastic Frontier Gravity Approach (The Case of Iran's Potential Agricultural Exports)

Main Article Content

Shokrollah Hajivand, Reza Moghaddasi, Yaaghoob Zeraatkish, Amir Mohammadinejad


Agriculture plays a crucial role in Iranian economy in terms of food supply, job creation, food security, and foreign earnings. The main purpose of this study is to provide an estimate of the country's agricultural exports potential and to determine how efficient Iran is in realizing this capacity. Using data for 38 destination countries for the period spanning from 1982 to 2017, proper stochastic frontier gravity model was estimated. Main findings revealed direct and significant impact of trade partners' GDP and population on Iran's agricultural exports, while distance and border barriers imposed by destination countries show significant reverse effect. Furthermore, on average, 69 percent of the country's agricultural export potential has been realized through the study period. Measures to promote competitive exports along with pursuing free bilateral and regional trade agreements for removing border barriers are recommended.

Article Details


  1. A.K. Miankhel, A.K. Kaliappa, and S.M. Thangavelu, Australia's export potential: an exploratory analysis, J. Asia. Pac. Econ. 19 (2) (2014), 230-246.
  2. S.L. Baier, and J. H. Bergstrand, Bonus vetus OLS: A simple method for approximating international trade-cost effects using gravity equation, J. Int. Econ. 77 (2009), 77-85.
  3. J. E. Anderson, and E. van Wincoop, Gravity with gravitas: a solution to the border puzzle, Amer. Econ. Rev. 93 (1) (2003), 170-192.
  4. S. Linder, An essay in trade and transformation, New York: Wiley, (1961).
  5. J. Tinbergen, Shaping the world economy: suggestions for an international economic policy, New York: Twentieth Century Fund, (1962).
  6. J. E. Anderson, A theoretical foundation for the gravity equation, Amer. Econ. Rev. 69 (1) (1979), 106-116.
  7. J. H. Bergstrand, Jeffrey, The gravity equation in international trade: some microeconomic foundations and empirical evidence, Rev. Econ. Stat. 67 (3) (1985), 474-481.
  8. E. Helpman, and P.Krugman, Market structure and foreign trade: increasing returns, imperfect competition, and the international economy. Cambridge, MA: MIT Press, (1985).
  9. A. V. Deardoff, Determinants of bilateral trade: does gravity work in the neoclassical world? NBER Working Papers 5377, National Bureau of Economic Research, Inc, (1995).
  10. Central Bank of Iran, Statistical yearbook, (2017).
  11. R. A. Roosta, R. Moghaddasi, and S. S. Hosseini, Export target markets of medicinal and aromatic plants, J. App. Res. Med. Arom. Plant. 7 (1) (2017), 84-88.
  12. K. Kalirajan, Regional cooperation and bilateral trade flows: an empirical measurement of resistance model, Intl. Trade. J. 21 (2) (2007), 195-209.
  13. J. M. C. S. Silva, and S. Tenreyro, Gravity-defying trade, Working Paper 03, Federal Reserve Bank of Boston, Boston, Mass (2003).
  14. L. Mátyás, L, Proper econometric specification of the gravity model, World. Econ. 20 (1997), 363-368.
  15. K. Kalirajan, and K. Singh, A comparative analysis of recent export performances of China and India, Asian. Econ. Papers. (2007).
  16. N. Nunn, and D. Trefler, Domestic institutions as a source of comparative advantage, Working Paper 18851, National Bureau of Economic Research (NBER), Cambridge MA, (2013).
  17. D. M. Gould, Immigrants link to the home country: empirical implications for U.S. bilateral trade flows, Rev. Econ. Stat. 76 (2) (1994), 1-25.
  18. T. Coelli, A guide to frontier version 4.1: a computer program for stochastic frontier production and cost function estimation, Center for Efficiency and Productivity Analysis Working Paper 96/07, University of New England, Armidale, Australia, (1996).