Estimation of Import Elasticity of Intermediate Goods with Other Production Factors in Iran

One of the most important parts of any economy is the foreign trade sector. From the time of the Industrial Revolution onwards and even before that, trade has always become increasingly important and its role in economic growth and development has increased. Iran is also a global oil exporter and importer of raw materials, machinery, capital goods and intermediate goods. Our country, as a developing country, has been greatly affected by its foreign trade. In this article, we will try to study the import of intermediate goods and its impact on factors. Therefore, considering the role that the import of intermediate goods can play in the structure of production, in this study, the demand for the import of intermediate goods as one of the factors of production along with other factors of production in the economic system has been estimated. In this regard, using the translog function to calculate the tensions, the share of each factor of production during the period 1978 - 2018 was estimated. The results showed that there is a substitution relationship between the factors of production, i.e., the import of intermediate goods and capital, the import of intermediate goods and labor, labor and capital. This showed that with the increase of the import price of intermediaries (as a factor of production), the demand for it decreases and the domestic producer takes action to produce that commodity and demands more capital and labor.