Identifying Production Chains in Iran's Domestic Environment and Examining the Foreign Trade Performance of Iran's Economy on them

Document Type : Research Paper

Authors

1 Department of Economics, Faculty of Economics and Political Sciences, Shahid Beheshti University, Tehran, Iran.

2 Department of Economic Sciences, Faculty of Economics and Political Sciences, Shahid Beheshti University, Tehran, Iran

3 Assistant Professor, Faculty of Economics, Shahid Beheshti University

4 Economic Sciences, Faculty of Economics and Political Sciences, Shahid Beheshti University, Tehran, Iran

Abstract

Trade imbalances are often a result of discrepancies in the production and consumption of economic activities. Given the limited availability of capital, knowledge, and resources in Iran, the theory of unbalanced growth suggests that investing in selected activities can help address these imbalances. Additionally, neo-structuralists argue for determining the appropriate level of trade. This study first identified production chains within Iran's domestic environment to achieve symmetric production and trade. Then, the latest input-output table (published by the Central Bank of Iran (2016)) examined the country's foreign trade performance within these chains. The findings reveal that Iran's domestic economy primarily operates upstream of production chains. Because the main exports of Iran are raw and semi-raw products. The contribution of vertical specialization in Iran's trade is insignificant and primarily includes downstream activities. Thus, to achieve symmetric trade, investing in downstream activities within domestic production chains is necessary, as these activities offer higher value-added and have greater demand in international trade. This can be achieved through the second stage of import substitution and export promotion.

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Main Subjects

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