A Study of Comparative Advantage and Intra-Industry Trade in the Pharmaceutical Industry of Iran

Drug costs in Iran accounts for about 30% of the total health care expenditure. Moreover,
pharmaceutical business lies among the world’s greatest businesses. The aim of this study was to analyze Iran’s
comparative advantage and intra-industry trade in pharmaceuticals so that suitable policies can be developed and
implemented in order to boost Iran’s trade in this field.
Methods: To identify Iran’s comparative advantage in pharmaceuticals, trade specialization, export propensity,
import penetration and Balassa and Vollrath indexes were calculated and the results were compared with other
pharmaceutical exporting countries. The extent and growth of Iran’s intra-industry trade in pharmaceuticals were
measured and evaluated using the Grubel-Lloyd and Menon-Dixon indexes. The required data was obtained
from Iran’s Customs Administration, Iran’s pharmaceutical Statistics, World Bank and International Trade
Center.
Results: The results showed that among pharmaceutical exporting countries, Iran has a high level of
comparative disadvantage in pharmaceutical products because it holds a small share in world’s total
pharmaceutical exports. Also, the low extent of bilateral intra-industry trade between Iran and its trading partners
in pharmaceuticals shows the trading model of Iran’s pharmaceutical industry is mostly inter-industry trade
rather than intra-industry trade. In addition, the growth of Iran’s intra-industry trade in pharmaceuticals is due to
its shares of imports from pharmaceutical exporting countries to Iran and exports from Iran to its neighboring
countries.
Conclusions: The results of the analysis can play a valuable role in helping pharmaceutical companies and
policy makers to boost pharmaceutical trade