The Price and Income Elasticity's of Import Demand of Drugs in Iran

One of the main principles of resistance economy, is to support domestic production and limiting imports, especially in sectors where there is the possibility of import-substituting production .This requires adjustment of exact trade policies,and to achieve this, identifying the structure of imports demand function and also price and income elasticity of import demand is necessary.This necessity is much more in the case of critical goods such as pharmaceutical. Therefore, Policy making in the field of drug imports, including quantitative ceilings or tariff on imported goods requires precise information about the sensitivity of import demand to price and income, as well as being essential or luxury of imported drugs for domestic consumers. The aim of this study is to estimate the price and income elasticity of imports by origin of imports to Iran (Switzerland, Germany, France and other countries) over the period of 1992 to 2014 and using Auto Regressive Distributed Lag (ARDL) and Source Differenced Quadratic Almost Ideal Demand System (SDQUAIDS) method. The results show that the income and price elasticity of import of drugs, both are smaller than one and the income elasticity is greater than the price elasticity. Estimating the elasticity by the origins of imports showed that the income elasticity of import of drugs from France and Germany is greater than one. Also the price elasticity of imports from all origins under study is less than one.