Original Research

Measuring intra-industry trade and productivity in the South African pharmaceutical sector

Nwabisa Malimba, Tsitsi E. Mutambara, Juniours Marire
South African Journal of Economic and Management Sciences | Vol 27, No 1 | a5486 | DOI: https://doi.org/10.4102/sajems.v27i1.5486 | © 2024 Nwabisa Malimba, Tsitsi E. Mutambara, Juniours Marire | This work is licensed under CC Attribution 4.0
Submitted: 10 January 2024 | Published: 05 August 2024

About the author(s)

Nwabisa Malimba, Department of Economics and Economic History, Faculty of Commerce, Rhodes University, Makhanda, South Africa
Tsitsi E. Mutambara, Department of Economics and Economic History, Faculty of Commerce, Rhodes University, Makhanda, South Africa
Juniours Marire, Department of Economics and Economic History, Faculty of Commerce, Rhodes University, Makhanda, South Africa

Abstract

Background: The South African pharmaceutical sector is Africa’s largest and most advanced but heavily depends on imported products and active pharmaceutical ingredients to meet its demands. The status quo is due to low intra-industry trade, which is necessary to induce innovation and technological progress essential for accelerating local production, export growth and reducing dependence on imports.

Aim: The primary objective of this article was to examine intra-industry trade in South Africa’s pharmaceutical sector and subsequently, total factor productivity (TFP) as a key driver of intra-industry trade.

Setting: Intra-industry trade was measured using data obtained from the United Nations Conference on Trade and Development databases, while the TFP was measured using data from the South African Reserve Bank (SARB) covering 2001–2021.

Method: The marginal intra-industry trade index (MIIT) and unmatched changes in trade (UMCIT) were used to measure intra-industry trade, while the Malmquist total factor productivity (MTFP) index was used to analyse SARB data to determine TFP.

Results: The MIIT index and UMCIT revealed that trade is predominantly inter-industry with episodes of industry specialisation and significant intra-industry changes. The MTFP results showed that TFP is solely driven by technical changes.

Conclusion: The study recommends that South Africa should develop a coordinated and sustainable innovation system in the pharmaceutical sector. This will help prevent sporadic technological advancements and promote intra-industry trade.

Contribution: The article contributes to the empirical literature on intra-industry trade in developing countries by showing the correlation between an improvement in TFP and an increase in intra-industry trade necessary to stimulate domestic production to reduce high import demand.


Keywords

intra-industry trade; marginal intra-industry trade; pharmaceutical sector; South Africa; total factor productivity; Malmquist total factor productivity; import dependence

JEL Codes

F11: Neoclassical Models of Trade; F14: Empirical Studies of Trade; L23: Organization of Production

Sustainable Development Goal

Goal 9: Industry, innovation and infrastructure

Metrics

Total abstract views: 1115
Total article views: 436


Crossref Citations

No related citations found.