The Impact of Imported Intermediate Goods on Exports: Evidence from Iran’s Industrial Firms

Encouraging firms to engage in exports is a crucial concern for developing countries, as the growth and dynamism of exports are essential for sustainable economic development. Researchers and policymakers have consistently sought effective ways to enhance firms' exports and examine the determining factors. One common method to boost and diversify exports, particularly in developing countries, involves a continuous shift towards downstream industries along production chains, utilizing the imported of intermediate goods. Over the past few years, the relationship between the importation of intermediate goods and exports has received attention. In this article, the impact of importing intermediate goods, along with other influential factors, on Iran's industrial exports is examined. The proposed model in the article considers exports as a function of both price and non-price variables, and estimation has been conducted using fourth edition ISIC (International Standard Industrial Classification) four-digit data for Iranian industrial firms during the time period from 2012 to 2019. By employing econometric techniqes and dynamic panel data methods, and considering that the data are defined cross-sectionally and time series, the generalized method of moments (GMM) and the Arellano-Bond type have been utilized for estimation. Empirical findings indicate that the importation of intermediate goods has a positive and significant impact on Iran's industrial exports. Specifically, 1% increase in the importation of intermediate goods results in 0.20% increase in Iran's industrial exports. Meanwhile, the impact of other variables on Iran's industrial exports is significant and aligns with theoretical foundations.