Assessing the Factors Associated With Iran’s Intra-Industry Trade in Pharmaceuticals

BACKGROUND: Pharmaceutical industry is a sensitive and profitable industry. If this industry wants to survive, it should be able to compete well in international markets. So, study of Iran’s intra-industry trade (IIT) in pharmaceuticals is essential in order to identify competitiveness potential of country and boost export capability in the global arena.

METHODS: This study assessed the factors associated with Iran’s intra-industry trade in pharmaceuticals with the rest of the world during the 2001–2012 periods using seasonal time series data at the four-digit SITC level. The data was collected from Iran’s pharmaceutical Statistics, World Bank and International Trade Center. Finally, we discussed a number of important policy recommendations to increase Iran’s IIT in pharmaceuticals.

RESULTS: The findings indicated that economies of scale, market structure and degree of economic development had a significantly positive impact on Iran’s intra-industry trade in pharmaceuticals and tariff trade barriers were negatively related to IIT. Product differentiation and technological advancement didn’t have the expected signs. In addition, we found that Iran’s IIT in pharmaceuticals have shown an increasing trend during the study period. Thus, the composition of Iran trade in pharmaceuticals has changed from inter-industry trade to intra-industry trade.

CONCLUSIONS: In order to get more prepared for integration into the global economy, the development of Iran’s IIT in pharmaceuticals should be given priority. Therefore, paying attention to IIT could have an important role in serving pharmaceutical companies in relation to pharmaceutical trade.