The Influence of Protectionism and Trade Liberalization Policies in Industries Performance, Emphasizing on their Competitiveness: Case Study of Iran's Industries

Trade Policies are one of the effective factors on the environment and performance of enterprises’ activities. The effectiveness level of such policies in the performance of enterprises, most particularly in their efficiency is influenced by the market competition. This paper tries to measure determining factors of productivity in Iran’s industries while focusing on the competitive degree within the period of protection policies (1995-2001) and trade liberalization period (2002-2007). The findings indicate that market power has directly led to the growth in productivity of industries. Although tariffs cuts have decreased the direct effect of market power on productivity growth (except for low-protected monopolistic industries), the market power has augmented productivity in Iran’s industries through exerting competitive pressure on monopolistic industries, motivating for innovation, introducing efficient enterprises and employing human capitals. Meanwhile, tariff cuts have encouraged the enterprises working in low-protected monopolistic industries to compete with foreign producers and grow their productivity. Yet, tariff cuts have decreased productivity growth in monopolistic industries that have access to medium level of protection. This indicates that the extent of tariff cuts has been more than the amount needed to encourage the medium-protected industries to compete with foreign producers and to improve productivity.