Parity Pricing As An Approach to Price Support Programmes: A Policy Analysis

The responsiveness of farm entrepreneurs to changes in agricultural prices, even in a traditional agrarian setting, is well established. Research on Pakistan’s agriculture by Afzal [1], and Gotsch and Falcon, [6] have shown that the response of farm producers to prices is positive and rational, and that they allocate their resources to crop and livestock activities under the influence of prices and other relevant economic parameters instead of being guided by sheer traditions. Desired development objectives in the farm sector can, therefore, be realized through judicious manipulation of the prices of farm products and farm inputs. Policy makers have quite a few options to obtain desired changes in agricultural prices. These options range from direct intervention in the marketing of agricultural produce and supplies, to price fixation, international trade regulation, and the like.