Pakistan Institute of Development Economics

PDR

THE PAKISTAN DEVELOPMENT REVIEW 

An Econometric Study of the Demand for Fertilizers in Pakistan

An empirical study of the demand for fertilizers in Pakistan is important for at least two reasons. First, we can identify the various factors responsible for the determination of demand. This will obviously depend to a large extent on the arguments we include in the demand function and the mathematical specification of the model. Nevertheless, one can obtain a rough idea of the importance of the various factors in the total demand for fertilizers. Second, a study of the demand side will enable us to obtain some estimates of the price elasticity of demand. Knowledge of price elasticity is extremely essential from the government policy point of view because the sale of fertilizers in Pakistan has been subsidized, and it is, therefore, essential to know the degree of respon-siveness of fertilizer demand to price changes. Despite the crucial importance for policy measures, hardly any econometric study of the demand for fertilizers has been carried out in Pakistan. To the best of my knowledge, P.L. Leonard [5] is the only one who has attempted to carry out such a study for Pakistan. The aim of this paper is, therefore, to quantify the degree of importance of the various factors in the fertilizer demand of Pakistan.

Mahmood A. Ayub

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