The Effect of Economies of scale and Variety on the Export of Iran's Automotive Industry

In the traditional theory of international trade, trade between countries and the extent of their success was explained only on the basis of available resources, but in the new theory of international, the role of factors such as economies of scale and product variety has been considered. The main purpose of this article is to investigate the impact of economies of scale and variety on foreign trade of Iran's automotive industry with major trading partners in the period 2002 to 1397. The Translog production function was used to evaluate the economies of scale in Iran's automotive industry and Feenstra variety index was used to measure product variety in the export products of Iran's automotive industry. While using iterative seemingly unrelated method to estimate the economies of scale, a dynamic panel data via GMM method was used to estimate the trade model. The results suggested that economies of scale and variety have positive impact on the foreign trade of Iran's automotive industry.