Country-Specific Determinants of Intra-Industry Trade in Pharmaceuticals: The Case of Poland and Its European Union Partners

Abstract

Trade cooperation between European Union countries is based mainly on intra-industry trade, consisting in the simultaneous import and export of similar products belonging to the same industry (commodity group). The present study has investigated the country-specifi c determinants of intra-industry trade between Poland and its European Union trading partners in pharmaceutical products during the time period 2004-2016. To this end, an econometric model for panel data was constructed. The research shows that the intensity of intra-industry trade in Poland-EU trade in pharmaceuticals is determined by several key factors. The intensity of trade with particular EU countries and the size of general government expenditure on health in the countries of trading partners have a positive impact on the development of this type of exchange. A factor that signifi cantly and simultaneously affects the intensity of intra-industry trade is the degree of imbalance in the trade balance in pharmaceutical products with individual trading partners. The development of intra-industry trade is also limited by factors related to the level of economic development of trading partners. The study confi rmed that the greater the differences in the level of GDP per capita between Poland and the trading partner, the less intense intra-industry trade. Also, the growth of GDP per capita in the countries of trade partners is not conducive to the development of intra-industry trade in Poland’s trade in pharmaceuticals. The direction of the impact of this variable (GDP per capita) on the intensity of two-way trade obtained in this study does not confi rm the predictions of the theory of intra-industry trade. However, the negative impact of this factor can be explained by the specifi city of pharmaceutical products that are purchased by consumers generally only in justifi ed situations resulting from health or life protection.