The impact of comparative advantage of the nine exports industries and export diversification on the value added of the industries in Iran

Developmental plans of the country emphasize on the exports-focused growth strategy and export diversification is one of the most appropriate policies in this area. Export diversification can serve as an important lever for production growth, if it moves from primary goods to products with high skill and high-tech industrial goods; on the other hand, it is necessary to note that the comparative advantage in the production and export of goods is one of the effective factors in understanding the manufacturing and exports capabilities of a country to adopt appropriate policies in this field, changes in the value-added of industrial activities can show manufacturing and export capabilities of a country and also production growth. Therefore the present study attempts to review and evaluate the effect of comparative advantage and export diversification on the value added according to the country's nine industries by using the method of panel data for the period of 1997-2012. Findings of this research indicate that the value-added of the industries has a similar trend with exports and export diversification. The variables of labor and physical capital in the industry sub-sectors have a positive impact on the value-added of the industries, which shows the developmental effects of these two variables. The human capital variable also has a positive effect on the added value that could be due to the skill and the spillover of research and development. Export diversification in the nine industries leads to growth of value added of industries, because trade of such goods than primary goods leads to a spillover effect, which is due to the technological growth. Comparative advantage of industries has an increasing effect on the value added of the industries, but the changes of comparative advantage of the industry sector has been very unstable, which can indicates the lack of appropriate and stable industrial strategies and the effectiveness of industry sector of the country from the fluctuations of oil revenues.

The impact of comparative advantage of the nine exports industries and export diversification on the value added of the industries in Iran Keywords:

Comparative Advantage , Export Diversification , Panel Data. JEL classification: .F14 , L16 , E13