The Potential of Iran's Agricultural Exports: Evidence from a Stochastic Frontier Gravity Model

Abstract

The evidence shows that the lack of comprehensive trade policies in Iran's agricultural sector has caused the growth of this sector to be unstable and limited to a few countries. Experts and economists also claim that Iran's capacity to achieve higher export figures and expansion of target markets is higher. Therefore, this paper aims to quantify the export capacity of Iranian agricultural products to trading partners using a stochastic frontier gravity model during 1997-2021. The results indicated that Iran has the export efficiency above 50% with only six countries including Germany, Russia, Vietnam, Spain, India, and the UAE, which represent the high capacity of Iran's export potential in many trading partners in agricultural products. In addition, except for Russia and the UAE, other neighboring countries have a high potential for accepting agricultural products. On the other hand, regarding the estimation of the average export potential and its gap from the actual export based on the estimated stochastic frontier gravity model, the results indicated that the highest potential agricultural exports are related to Turkey, Egypt, Libya, Croatia, and Uzbekistan, respectively. The export gap is negative for all trading partners, which indicates that Iran has agricultural exports less than the maximum possible limit to all trading countries. The results confirmed that economic size and geographical distances have a positive and negative effect on Iran's agricultural exports, respectively.