Evidence on Allocative Efficiency and Elasticities of Substitution in the Manufacturing Sector of Pakistan

This study investigates the nature of allocative inefficiencies in large scale manufacturing sector of Pakistan over the period of 1969-70 to 1990-91. The study employ translog cost function to examine allocative inefficiency with capital labor and raw material as inputs. We estimate translog cost f...

Full description

Saved in:
Bibliographic Details
Published in:Pakistan development review 2005, Vol.44 (4), p.795-803
Main Authors: Zafar, Sohail, Ahmed, Eatzaz
Format: Article
Language:English
Subjects:
Allocative efficiency
Capital depreciation
Competitiveness
Cost efficiency
Cost estimates
Cost functions
Cross price elasticity of demand
Development studies
Firm theory
GROWTH/INDUSTRY
Import substitution
Labour economics
Manufacturing
Manufacturing industries
Price elasticity
Pricing
Raw material costs
Raw materials
Working capital
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:This study investigates the nature of allocative inefficiencies in large scale manufacturing sector of Pakistan over the period of 1969-70 to 1990-91. The study employ translog cost function to examine allocative inefficiency with capital labor and raw material as inputs. We estimate translog cost function along with share equations for manufacturing sector as a whole. The analysis here after performed with and without distortion parameters. The relative price efficiency between each pair of inputs provide the evidence at aggregate level that raw material is over used as compared to labor, while other inputs are equally efficiently utilized. It turns out labor is most responsive factor to change in factor price. Study suggests that long run economic growth could be achieved through adjustment policies that correct input market distortions.
ISSN:0030-9729
DOI:10.30541/v44i4iipp.795-803