Pharmaceutical industry and trade liberalization using computable general equilibrium model

Abstract

Computable general equilibrium models are known as a powerful instrument in economic analyses and widely have been used in order to evaluate trade liberalization effects. The purpose of this study was to provide the impacts of trade openness on pharmaceutical industry using CGE model.Using a computable general equilibrium model in this study, the effects of decrease in tariffs as a symbol of trade liberalization on key variables of Iranian pharmaceutical products were studied. Simulation was performed via two scenarios in this study. The first scenario was the effect of decrease in tariffs of pharmaceutical products as 10, 30, 50, and 100 on key drug variables, and the second was the effect of decrease in other sectors except pharmaceutical products on vital and economic variables of pharmaceutical products. The required data were obtained and the model parameters were calibrated according to the social accounting matrix of Iran in 2006.The results associated with simulation demonstrated that the first scenario has increased import, export, drug supply to markets and household consumption, while import, export, supply of product to market, and household consumption of pharmaceutical products would averagely decrease in the second scenario. Ultimately, society welfare would improve in all scenarios.We presents and synthesizes the CGE model which could be used to analyze trade liberalization policy issue in developing countries (like Iran), and thus provides information that policymakers can use to improve the pharmacy economics.