The Role of Enabling Trade Indices on Iran's Exports: Gravity Model Approach

The importance of establishing “Enabling Trade” measures in the countries of origin and destination of exports is of great importance in the international economic literature. In this regard, many studies have shown that improving Enabling Trade can reduce trade costs and improve export performance. However, in previous studies, the issue of Enabling Trade at export destinations and its impact on the commercial performance of export sources has not received much attention. In addition, the need for non-linear estimation of gravity models has been almost completely agreed in the past decade. Therefore, this article studies the estimation of the impact of the Poisson Pseudo-Maximum Likelihood (PPML) on the trade facilitation of its 21 trading partner countries from 2008 to 2016. Enabling Trade Index (ETI) includes four sub-indexes: market access, border management, transportation and communications infrastructure, and operating environment. The results show that Enabling Trade Indices such as market access, border management, infrastructure, and operating environment in the country of origin and export destination countries have had a positive and significant impact on trade flows between Iran and its trading partners. In addition, the results show that the importance and intensity of Iran’s enabling trade indicators are higher than similar measures taken by its trading partners. The authors interpret it as explaining the important role of enabling trade policies in increasing trade between Iran and its trading partners.