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Financial market efficiency in an Agrarian economy: Microeconometric analysis of the Pakistani Punjab

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  • Maqbool Sial
  • Michael Carter

Abstract

The shadow price of capital in production is a useful indicator of the efficacy of the rural financial system. Using data on participants and non‐participants in a small farm credit programme from the Pakistani Punjab, this article estimates the shadow price of capital. Endogenous switching regressions techniques are employed to control for the likely heterogeneity of borrowers versus non‐borrowers. Results indicate that an individual selected at random from the population of small farmers would experience a 200 per cent rate of return on the first rupee borrowed from the small farm credit programme, indicating a high shadow price of capital and a prima facie case for small farm credit programmes.

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  • Maqbool Sial & Michael Carter, 1996. "Financial market efficiency in an Agrarian economy: Microeconometric analysis of the Pakistani Punjab," Journal of Development Studies, Taylor & Francis Journals, vol. 32(5), pages 771-798.
    • Handle: RePEc:taf:jdevst:v:32:y:1996:i:5:p:771-798
    DOI: 10.1080/00220389608422439
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