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The Price Response of Major Crops in Pakistan: An Application of the Simultaneous Equation Model

  • Mubarik Ali

    (Chemonics International, Economic Analysis Network project, Islamabad.)

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    This paper specifies a model to simultaneously estimate the price response, assuming an interdependence among crops. The model is applied to estimate own-and cross-price elasticities of five major crops in Pakistan, viz., wheat, cotton, rice, sugarcane, and maize based on the production and expected wholesale-price data for the period 1957-86. The study found little potential to enhance overall agricultural productivity by increasing the single crop price, since either the own-price elasticities were low or, otherwise, the nagative cross-price effects on the production of other crops were high. However, a 10-percent systematic improvement in terms of trade for agriculture will increase overall agricultural productivity by about 6 percent in the long run.

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    Article provided by Pakistan Institute of Development Economics in its journal The Pakistan Development Review.

    Volume (Year): 29 (1990)
    Issue (Month): 3 and 4 ()
    Pages: 305-325

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    Handle: RePEc:pid:journl:v:29:y:1990:i:3-4:p:305-325
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    1. Gotsch, Carl H. & Falcon, Walter P., 1975. "The Green Revolution and the Economics of Punjab Agriculture," Food Research Institute Studies, Stanford University, Food Research Institute, issue 01.
    2. Askari, Hossein & Cummings, John Thomas, 1977. "Estimating Agricultural Supply Response with the Nerlove Model: A Survey," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 18(2), pages 257-92, June.
    3. Durbin, J, 1970. "Testing for Serial Correlation in Least-Squares Regression When Some of the Regressors are Lagged Dependent Variables," Econometrica, Econometric Society, vol. 38(3), pages 410-21, May.
    4. Narayana, N S S & Shah, M M, 1984. "Farm Supply Response in Kenya: Acreage Allocation Model," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 11(1), pages 85-105.
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