Evaluating the Efficiency of Iran Handmade Carpet Export by Using Gravity Model with Stochastic Frontier Approach

Abstract Persian carpet has been known as one of the most prominent manifestations of Iranian art and culture over years, and has always had a unique position in the export basket of Iran. This art possesses a significant share of the value of non-oil exports. In this research, we have estimated the efficiency of Iran's carpet export market by using gravity model with a stochastic boundary and spatial regression approach from 1973 to 2023. Research findings show that Gross Domestic Product (GDP)of Iran and major importing countries, and a common border with Iranian carpet importer countries have a positive significant effect on exports. Moreover, a statistically significant negative relation was obtained between China's carpet export and that of Iran. In addition to the negative effects of competitor countries on exports, exchange rate fluctuations are considered as a serious threat to Iranian carpet exports. As a final result, Iran's carpet exports have a low level of efficiency, which can be attributed to global sanctions, the use of inferior materials, increasing rivals, plagiarism of Iranian designs, and the inconsistency of production with market demand JEL: F14, F19, F31, E58