Assessing the Effect of Intra-Industrial Trade between Iran and Selected Trading Partners on Environmental Quality

The mechanism of intra-industry trade defines technology transfer through sectors that produce and export products that lead to easier absorption of foreign technologies. Therefore, compared to inter-industry trade, intra-industry trade may encourage the use of environmentally friendly technology to a greater extent. The purpose of this paper has been to evaluate the effect of intra-industry trade on environmental quality for Iran and selected countries including France, Japan, South Korea, Italy, Spain, Belgium, Russia, Australia, Germany, Denmark, China, Turkey, UAE and Pakistan during the period of 2001-2020. The model was estimated by the generalized least squares (GLS) method based on the panel data approach. In this respect, the variables of carbon dioxide and methane emissions, as the indicators of environmental quality were used through the development of the environmental econometric model. The empirical results showed that the intra-industry trade variable (proxied by Grobel-Lloyd index) was statistically significant at 10% significance level and had a negative sign. This means that the expansion of intra-industry trade, in which the level of competition and the quality of goods and services are improved, plays an important role in reducing environmental pollution as a result of increasing the quality of the environment in Iran and the trading partners. However, Iran's trade relations with the trading partners in the form of intra-industry trade do not include a high share, which implies the country's traditional and inter-industry trade relations with its partners. This can be caused by the production of raw materials and the export of these goods and Iran's low-ranking technology with the selected partners. Such trade relations may cause destructive effect the environment.