Pakistan Institute of Development Economics



On Planning in Pakistan (Review Article)

During the past decade, increasing attention has been given to the role of agriculture in the process of economic development. One aspect of the discus¬sion has concerned the significance of relative prices for farmer in decision¬making. Recent studies have yielded estimates of supply elasticities for jute in East Pakistan, and for cotton, wheat, and several other crops in West Pak¬istan, so that a basic body of information is beginning to emerge. The main purpose of this note is to supplement these studies by presenting estimates of the price elasticity of supply for rice in East Pakistan. However, since rice and jute are the main alternate crops in East Pakistan, supply elasticities for jute will also be presented. Because of fluctuations in agricultural yields due to variations in weather conditions, the acreage response to price has generally been estimated rather than the output response. Significant changes in the size and timing of the monsoon rains in East Pakistan make it particularly important in this case to use acreage changes as a measure of farmer response to price. Inputs others than land, such as fertilizers, better seeds, and plant-protection measures are not widely used in East Pakistan; and apparently, these measures are not very responsive to price changes. At least, no statistically significant relationship exists between the relative price of rice (to jute) in one year and rice yields in the next year. An increased price for rice results in an extension of rice acreage,) but it does not result in significantly more intensive cultivation. Under these conditions, the price elasticity of acreage closely approximates the elasticity of planned output2

Aftab Ahmad Khan

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