Price Distortions and Resource Use Efficiency in a Pakistani Province.

The objectives of this paper are to test the hypotheses of technical and price efficiency through estimating translog profit functions using the 1987-88 farm level survey data from the North West Frontier Province (NWFP) of Pakistan. The price efficiency hypothesis cannot be rejected while technical inefficiency is lowest for large sized farms. Despite the widespread use of family labor in NWFP, we find that there is no price inefficiency in the labor market when family labor is imputed at the appropriate wage rate. Moreover, there is no evidence of inefficiency in any of the input or output markets. This is plausible since the region is highly developed and a number of opportunities for work outside the family farm exist. Copyright 1993 by Oxford University Press.