Analysis of Allocative Efficiency in Northern Pakistan: Estimation, Causes, and Policy Implications

Realising productivity gains in agriculture is an important challenge for Pakistan. With a fast-growing population (3.1 percent per year), it is difficult for the economy to meet domestic food requirements. Like most less developed countries, yields of most crops in Pakistan are lower than the yields realised by researchers in on-farm experiments conducted in the farmers’ fields. The average yield gap between the farmers’ current yields and what would be profitable and feasible, given existing technology, is reported to be 30 to 40 percent [Byerlee (1987)]. Byerlee (1987), however, suggests that there is a potential for increasing productivity in most of the irrigated areas of Pakistan through the use of new inputs and a more efficient use of the existing inputs to exploit the genetic potential of the existing varieties. He argues that the wide array of new inputs vastly increases the complexity of crop management. The technical skills required to use the new inputs efficiently are much greater than the simple skills needed to adopt varietal changes. Hence, with more complex technological options and a more dynamic environment, the potential for economic inefficiency (both technical and allocative) is substantially increased. The purpose of this paper is to measure farm-specific allocative efficiency and the effect of management variables on allocative efficiency of wheat producers in an irrigated area in northern Pakistan. This will assist researchers, extension agents, and policy-makers to identify the ways and means to increase wheat productivity in Pakistan.

Analysis of Allocative Efficiency in Northern Pakistan: Estimation, Causes, and Policy Implications

Realising productivity gains in agriculture is an important challenge for Pakistan. With a fast-growing population (3.1 percent per year), it is difficult for the economy to meet domestic food requirements. Like most less developed countries, yields of most crops in Pakistan are lower than the yields realised by researchers in on-farm experiments conducted in the farmers’ fields. The average yield gap between the farmers’ current yields and what would be profitable and feasible, given existing technology, is reported to be 30 to 40 percent [Byerlee (1987)]. Byerlee (1987), however, suggests that there is a potential for increasing productivity in most of the irrigated areas of Pakistan through the use of new inputs and a more efficient use of the existing inputs to exploit the genetic potential of the existing varieties. He argues that the wide array of new inputs vastly increases the complexity of crop management.1 The technical skills required to use the new inputs efficiently are much greater than the simple skills needed to adopt varietal changes. Hence, with more complex technological options and a more dynamic environment, the potential for economic inefficiency (both technical and allocative) is substantially increased. The purpose of this paper is to measure farm-specific allocative efficiency and the effect of management variables on allocative efficiency of wheat producers in an irrigated area in northern Pakistan.2 This will assist researchers, extension agents, and policy-makers to identify the ways and means to increase wheat productivity in Pakistan

Analysis of economic efficiency in northern Pakistan: Estimation, causes and policy implications

The study estimates technical and allocative efficiency using the stochastic translog frontier production function and then relates them to management qualities (experience, education, extension and knowledge) of wheat farmers in northern Pakistan. The study provides guidance for policy makers, agronomists and extension agents to improve wheat productivity in the area.The average technical efficiency is 76 percent which is consistent with the previous studies in LDCs. To relate technical inefficiency to the farmer's management qualities a two-stage approach is developed which assumes that technical inefficiency depends upon management practices and each management practice in turn is affected by management qualities. To increase technical efficiency farmers need to use improved varieties, good wheat stand and control broadleaf weed. Farmer's knowledge about wheat technology plays a major role in the adoption of the above management practices. To test the robustness of the frontier approach, an alternative approach which involved putting management quality variables directly into the production function (the direct approach) was developed. The only major difference was that in the direct approach, extension contacts are important in increasing productivity, whereas they had no effect in the frontier approach.The average cost-constrained output-maximizing allocative efficiency is 43 percent which is substantially lower than the previous studies in LDCs. Farmers are also scale inefficient--the marginal cost of an input at the constrained output-maximizing input levels was far below the price of wheat. To increase allocative and scale efficiency, farmers need to change the input mix and to increase the scale of operation. None of the management qualities were found to affect allocative efficiency. However, interaction of farmers with the marketing agents play an important role in achieving higher allocative efficiency.The theoretical argument that aggregation of inputs overestimates technical inefficiency is not supported by the results but mis-specification of functional form (use of Cobb-Douglas as opposed to the translog production frontier) produces overestimates of technical inefficiency.U of I OnlyETDs are only available to UIUC Users without author permissio

Impacts of the training and visit extension system on farmers' knowledge and adoption of technology: Evidence from Pakistan

This paper provides quantitative evidence on the impact of the Training and Visit (T & V) extension system in the irrigated Punjab of Pakistan. Three models are analyzed using limited dependent variable regressions: the impact of T & V on the number of extension contacts with farmers; the effect of extension contact on farmers' knowledge of wheat technology; and the impact ofT & V on the adoption of improved wheat technology. The first model analyzes the impact of T & V on the quantity of extension contact and the latter two models analyze the effect on the quantity. and quality of extension contact. It is concluded that T & V has increased the quantity but not the quality of extension contact and this, in turn, has increased farmers' knowledge and adoption of technology. However, the overall impacts have been small relative to those observed in a similar area in India