'Pakistan Institute of Development Economics (PIDE)'
Doi
Abstract
Lack of effective competition in factor markets often produces
allocative or price inefficiencies in the manufacturing sector of
developing countries like Pakistan. Such inefficiencies are common due
to distortion in factor markets leading to the use of inappropriate
factor proportions Lau and Yotopoulos (1971, 1972), Yotopoulos and Lau
(1973), Burki, et al. (1997), Khan (1998), Ahmed (1999), Zafar (2000).
Pakistan is also one of the country where labour is abundant but capital
and raw material are scarce. Our finding undermine estimates of
elasticities of demand and substitution based on classical assumption
that factor markets are perfectly competitive i.e. Kazi, et al. (1976),
Kemal (1981), Battese and Malik (1987, 1988, 1993), Malik, et al.
(1989), Mahmood (1989, 1992), Zahid, et al. (1992) and Khan and Rafiq
(1993). In order to discuss the cost structure of the manufacturing
sector we will estimate well behaved translog cost function