The Study of Effective Factors on Iran’s Pharmaceutical Export Supply and Demand

The importance of drug as a valuable export product in the global economy becomes clearer every day. Understanding the problems of exports and factors affecting it, can be an important step to keep Iran’s position in the world markets and further export development of this product. In this study, Iranian pharmaceutical exports’ supply and demand functions were calculated using co-integration and error correction techniques through time series quarterly data of 2000-2014 in order to identify the factors affecting pharmaceutical exports (short run and long run relationships among the variables) and price and income elasticities. The long run price elasticity of demand of -2.28 indicates that an increase in Iran’s export price relative to competitor′s export price will have a negative impact on pharmaceutical export volume. Also, the long run income elasticity of foreign demand for pharmaceutical exports of Iran is 1.11. That is an increase in income of foreign countries will have a positive impact on Iran’s pharmaceutical export. On the other hand, the long run price elasticity of export supply is 1.09, indicating that the supply of pharmaceutical export is sensitive to the relative price changes. In other words, an increase in export price relative to domestic price as well as an expansion of the pharmaceutical production capacity will increase its export supply. Being aware of the factors affecting the pharmaceutical exports can prepare the ground to develop the pharmaceutical industry and balance the supply and demand in the long run. Therefore, the results of this study can help Iran′s policymakers and managers to choose a clearer path for the pharmaceutical trade policies.