Statistics Orders and Determinant Factors in Tariffs in Iran

Import tariffs are set based on the following factors: terms of trade, government revenue, trade agreements, trade protection, and political economy. This study attempts to evaluate the explanatory power of these factors in influencing the import tariffs in Iran. The data sources that have been used in this study are: Iran’s custom, import and export regulation book, survey of industrial plants, and WITS. Our final data is a panel of industries disaggregated at 4digits of ISIC codes. In our OLS model, the industries’ fixed effects are controlled; Other control variables are employment, value added, and tariffs of the same industries in other countries, export indices, and government income. Results indicate that tariffs are positively correlated with sectors’ employment and added-value shares. We also document that, after controlling value added and employment, about 60% of tariffs’ cross variation could be explained by dummy variables pertaining to industries. This finding may imply an “implicit” industrial plan, which imposes higher protection for some sectors. Finally, about 20% of the tariffs variation cannot be explained through the model, which might be due to data errors, miss-specification, or, political economy (lobbying). The share of each of those factors can be further investigated in future studies.