Intra Industry Trade Measuring Methodology: A Case Study of Iran's Manufacturing Industry

The main purpose of this paper is to present methods and recent development in the literature of intra industry trade (IIT) measuring. The case study also is carried out for Iranian manufacturing industries during time period 1997-2003. For this, Iran's foreign trade data was collected, processed, and then used to estimate IIT indices with respect to recent literature developments in IIT measuring. Based on theoretical literature, Weighted Grubel and Loyd index and Fontagne & Freudenberg Trade types index are the most important static IIT indices. Furthermore, Briilhart index and Azhar & Elliott index are the most important dynamic IIT indices. Empirical results indicate low but increasing IIT in manufacturing industries of Iran. Furthermore, an important part of this IIT is devoted to Vertical Intra Industry (VIIT). Marginal IIT of Iran's manufacturing industries also is low but overwhelming. In other words, Iran's foreign trade change is mainly due to inter-industry trade. Thus, it seems that currently Iran's foreign trade is mainly based on comparative advantage. Generally speaking, this study is important due to increasing IIT studies and IIT importance for developing non oil exports for Iran.