Agricultural exports have a key role in non-oil export revenues of Iran. Saffron is an agricultural product which Iran has comparative advantage in its production. The appropriate land and weather conditions with low wages are the most important factors for which its production and exports has increased significantly during recent years (figure 1). Iran now is the biggest producer of saffron in the world. But at the same time, instability of the export revenues is a big problem and has origins in export demand and price instabilities. Identification of the main determinants of export demand is an essential step for planning and policy making with the goal of expanding production and exports. This analysis uses panel data to increase the number of observations, variability and degrees of freedom and, at the same time, to decrease collinearity among explanatory variables. In addition, panel data models control for individual heterogeneity and are able to study the dynamics of adjustment.

Keywords