Risk Analysis and Diversification of Iran's Non-oil Export: Application of Nonparametric and Semiparametric Methods

Document Type : Original Article


1 Associate Professor of Economics, Faculty of Economics & Social Sciences, Shahid Chamran University of Ahvaz, Ahvaz, Iran

2 Assistant Professor of Mathematics, Faculty of Mathematical Sciences & Computer, Shahid Chamran University of Ahvaz, Ahvaz, Iran

3 Ph.D Candidate in Economics, Faculty of Economics & Social Sciences, Shahid Chamran University of Ahvaz, Ahvaz, Iran


In this study, using portfolio theory and the risk content of exports models and risk-weighted comparative advantage, the risk and diversification of Iran's non-oil export portfolio are analyzed. In fact, each of the export commodity sectors are considered as an asset and its variations in the export structure are calculated as the content risk of exports. In this regard, using export data during the period 1988-2019, the diversification index of Iran's non-oil exports has been measured based on the overall difference measures. In addition, the risk- weighted comparative advantage is calculated and its relationship with the risk content of exports and export diversification index using nonparametric and semi-parametric estimation analyzed. According to the results, the relationship between the degree of export diversification and the risk of the risk- weighted comparative advantage is U-shaped. This means that if there is a comparative advantage in the safe export sectors of the country, it will choose fully specialized. Exports will specialize in high-risk sectors if the comparative advantage is strong enough. However, in intermediate values of comparative advantage, the export will diversify between risky and risk-free sectors and an optimal combination solution is selected.


- Abbaschian, A. & Zirak, M. (2012). Outlook of Non-oil Exports in the Fifth Development Plans. Bimonthly Economic Journal of Investigating Issues and Economic Policy, 7(7&8), 47-66 (In Persian).
- Agosin, M., Alvarez, R., & Bravo‐Ortega, C. (2012). Determinants of Export Diversification Around the World: 1962-2000. The World Economy, 35(3), 295–315.
- Al-Marhubi, F. (2000). Export diversification and growth: an empirical investigation. Applied Economics Letters, 7(9), 559-562
- Alwang, J., & Siegel, P.B. (1994). Portfolio models and planning for export diversification: Malawi, Tanzania and Zimbabwe. Journal of Development Studies, 30(2), 37–41.
- Anderson, J., & Riley, J. G. (1976). International trade with Huctuating prices. Inter- national Economic Review, 17, 76-97.
- Balassa, B. (1965). Trade liberalisation and “revealed” comparative advantage 1. The Manchester School, 33(2), 99–123.
- Batra, R.N. (1975), Production uncertainty and the Heckscher—Ohlin thcorcm. Review of Economic Studies, 42, 259- 268.
- Bertinelli, L., Heinen, A. & Strobl, E. (2009). Export Diversification and Price Uncertainty in Developing Countries : A Portfolio Theory Approach. Available at SSRN: https://ssrn.com/abstract=1327928.
- Bertinelli, L., Salins, V., & Strobl, E. (2006). Export diversification and price uncertainty in Sub-Saharan Africa and other developing countries: a portfolio theory approach. Unpublished manuscript.
- Brainard, W. C., & Cooper, R.N. (1968). Uncertainty and diversification in international trade. Food Research Institute Studies, 8(1387-2016–116100), 257–285.
- Cáceres, L.R. (1979). Economic integration and export instability in central America: A portfolio model. The Journal of Development Studies, 15(3), 141–153.
- Cameron. M., Viviers. W., (2017). Identifying realistic export opportunities for Rwanda based on the TRADE-DSM approach. IGC Intrnational Growth Centre, 1-23.
- Carmichael, B., Koumou, G.B., & Moran, K. (2015). Unifying Portfolio Diversification Measures Using Rao’s Quadratic Entropy. CIRANO Tech. Rep. 16, 1–45.
- Chang, P.H.K. (1991). Export diversification and international debt under terms-of-trade uncertainty: An intertemporal approach. Journal of Development Economics, 36(2), 259–277.
- Cleveland, W.S. (1979). Robust Locally Weighted Regression and Smoothing Scatterplots. Journal of the American Statistical Association, 74(368), 829–836.
- Crama, Y., & Schyns, M. (2003). Simulated annealing for complex portfolio selection problems. European Journal of Operational Research, 150(3), 546–571.
- Dai, J. (2013). Efficient Geographical Diversification of Export Trade: The Case Study of China. In International Conference on Geo-Informatics in Resource Management and Sustainable Ecosystem (518–530).
- De Pineres, S.A.G., and Ferrantino, M. (1997). Export diversification and structural dynamics in the growth process: The case of Chile. Journal of development Economics, 52(2), 375-391.
- Dejpasand, F., Alsadat Hosaini, E., & Golzarianpour, S. (2012). The Effect of the Growth of Non – Oil Exports on the Growth of Gross Domestic Products. Journal of Economics and Modelling, 3(10), 109–133 (In Persian).
- Estrada, J. (2004). Mean-Semivariance Behavior: An Alternative Behavioral Model. Journal of Emerging Market Finance, 3, 231–248.
- Ferreira, G. (2009). From Coffee Beans to Microchips: Export Diversification and Economic Growth in Costa Rica. 2009 Annual Meeting, January 31-February 3, Atlanta, Georgia, 1-24.
- Gnangnon, S.K. (2019). Multilateral trade liberalisation helps promote export product diversification: Trade tensions damage the prospects of the poorest economies. Economic Affairs, 39(3), 363–380
- Grossman, G.M., & Razin, A. (1985). The Pattern of Trade in a Ricardian Model with Country-Specific Uncertainty. International Economic Review, 26(1), 193–202.
- Hausmann, R., Hwang, J., & Rodrik, D. (2007). What you export matters. Journal of Economic Growth, 12(1), 1–25.
- Heiland, I. (2019). Global Risk Sharing through Trade in Goods and Assets: Theory and Evidence. Unpublished Working Paper.
- Helpman, E. (1988). Trade Patterns under Uncertainty with Country Specific Shocks. Econometrica, 56(3), 645–659.
- Helpman, E., & Razin, A. (1978). A theory of international trade under uncertainty. Academic Press.
- Hesse, H. (2008). Export Diversification and Economic Growth. The World Bank Group.
- Heydari Motlagh, R. (2012). Import management requirements in the country. Ecnomic Journal, 11(1&2), 63-90 (In Persian).
- Huang, X. (2010). Portfolio Analysis - From Probabilistic to Credibilistic and Uncertain Approaches. Springer, Berlin, Germany.
- Imbs, J., & Wacziarg, R. (2003). Stages of Diversification. American Economic Review, 93(1), 63–86.
- Giovanni, di J. & Levchenko, A.A. (2012). The Risk Content of Exports: A Portfolio View of International Trade. NBER International Seminar on Macroeconomics, University of Chicago Press, 8(1), 97-151.
- Kadyrova, A. (2011). The effect of export diversification on country growth. Master of Arts Thesis, Economics Departement of Central European University, Budapest.
- Kemp, M. C., & Liviatan, N. (1973). Production and trade patterns under uncertainty, Economic Record, 49, 215-227.
- Koren, M. (2004). Financial Globalization, Portfolio Diversification, and the Pattern of International Trade. IMF Working Papers, No. 03.
- Labys, W. C., & Lord, M. J. (1990). Portfolio optimisation and the design of Latin American export diversification policies. The Journal of Development Studies, 26(2), 260–277.
- Layard, P. Richard G., & A. Alan . (1999). Microeconomic Theory. translate by Abbas Shakeri Hossein Abad Trans (In Persian).
- Markowitz, H.M. (1952). Portfolio selection. The Journal of Finance, 7(1), 77–91.
- Mahdavi Adeli, M., Ghezalbash, A., & Daneshnia, M. (2012). The Effect of Oil Price Changes on Some of the Main Iranian Macroeconomic Variables. Iranian Energy Economics, 1(3), 131–170 (In Persian).
- Mohammadzade Asl, N. and Mohammadi, F. (2013). Study Of Effective Factors On Non-Oil Export In Iran With Emphasis On Globalization.  Journal of Financial Economics  and Development, 6(21), 7-30 (In Persian).
- Nowrouzi, A., Panahi, M., Ghaffarzadeh, H., & Ataei, A. (2019). Optimizing Iran’s natural gas export portfolio by presenting a conceptual framework for non-systematic risk based on portfolio theory. Energy Strategy Reviews, 26, 629-640 In Persian).
- Petersson, L. (2005). Export diversification and intra-industry trade in South Africa. South African Journal of Economics,73, 785-802.
- Pourkazemi, M. H., Samsami, H., & Eftekharzadeh, S. (2011). Comparing Relative Advantages of Agriculture and Non-Agricultural Manufacturing Sectors in Iran’s Economy. Journal of Economics and Modelling, 1(4), 83–108 (In Persian).
- Ranjbar. O. (2021). Investigating the structure of non-oil exports of the Islamic Republic of Iran: quality, diversity and economic complexity. Trade Promotion Organization of Iran (In Persian).
- Ruffin, R.J. (1974a). International trade under uncertainty. Journal of lnlernalioruzl Economics, 4, 243 -260.
- Sabzehparvar, S. (2010). Optimization of non-oil export portfolio in uncertainty conditions (fuzzy ideal planning approach). Master Thesis, Ministry of Science, Research and Technology-Allameh Tabatabai University (In Persian).
- Shakeri, A. & Zamani, R. (2020). Impact of Export Diversification and Export Composition on Economic Growth of Iran. Quarterly Journal of Economic Growth and Development Research, 12(46), 15-43 (In Persian).
- Taghipour, A., & Mousavi Azad Kasmaei, A. (2001). Investigating the relationship between diversification, income stability. Iranian Journal of Trade Studies (IJTS), 18, 68 (In Persian).
- Turnovsky, S.J. (1974). Technological and Price Uncertainty in a Ricardian Model of International Trade. The Review of Economic Studies, 41(2), 201–217.
- Yang, Y., Li, J., Sun, X., & Chen, J. (2014). Measuring external oil supply risk: A modified diversification index with country risk and potential oil exports. Energy, 68, 930–938.
- Zhang, M., Nan, J., & Yuan, G. (2012). The Geometric Portfolio Optimization with Semivariance in Financial Engineering. Systems Engineering Procedia, 3, 217–221.