The Effect of Underground Economy on Importing Medicine in Iran

Pharmaceutical Products as strategic commodities have direct relationship with public health status. Policy making in this sector strongly depends on determination of different factors that affect medicine production, consumption and imports. According to economic literature, like other commodities, medicine imports are affected by exchange rate and grass national product (GNP). One of the most important factors affecting medicine import is related underground economic activities like medicine smuggling and informal markets.
In this study, through benefiting from fuzzy logic approach and using Matlab 2012 software, the size of underground economy in Iran was estimated. Then, by specifying an import model for pharmaceutical products, the effect of underground economy on medicine import demand in Iran during 1971-2011 was determined using ordinary least squares (OLS) method in Eviews6.
Share of underground economy on grass domestic product (GDP) during this period has been swingy and the effect of underground economy on medicine imports has been negative but non-significant.
Despite the necessity of considering medicine smuggling and informal markets in health sector, this important factor has been neglected in Iran policymaking processes and decision makings for medicine import.