ESTIMATING ALLOCATIVE EFFICIENCY AND ELASTICITIES OF SUBSTITUTION IN THE LARGESCALE MANUFACTURING SECTOR OF PAKISTAN

Mahmoodul Hassan Khan* and Abid Burki ()

Pakistan Journal of Applied Economics, 2000, vol. 16, 49-63

Abstract: This paper considers a generalised trans log cost function, which takes care of distortions in factor markets due to the regulatory environment in Pakistan's large-scale manufacturing sector. The paper explores the nature of allocative inefficiencies and evaluates elasticities by employing pooled provincial time-series data of Sindh and Punjab from the CMI. The paper rejects the use of neo-classical assumption of perfect competition in input markets as a maintained hypothesis and argues that price and substitution elasticities produced by previous studies, without incorporating allocative inefficiencies, may be misleading.

Date: 2000
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