Journal Article

Market Imperfections and Output Loss in the Presence of Expenditure Constraint: A Generalized Shadow Price Approach

Anjana Bhattacharyya and Subal C. Kumbhakar

in American Journal of Agricultural Economics

Published on behalf of Agricultural and Applied Economics Association

Volume 79, issue 3, pages 860-871
Published in print August 1997 | ISSN: 0002-9092
Published online August 1997 | e-ISSN: 1467-8276 | DOI: http://dx.doi.org/10.2307/1244427
Market Imperfections and Output Loss in the Presence of Expenditure Constraint: A Generalized Shadow Price Approach

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In view of widespread capital market imperfections and farmers' budget constraints in developing countries, an indirect production function (IPF) is used for a study of 289 Indian paddy growers. The analysis generalizes the IPF to accommodate the numerous kinds of market imperfections and policy-induced distortions that pervade less developed countries' agriculture. The presence of these distortions in an expenditure-constrained situation results in a loss of output, defined as the difference between maximal potential output and actual output. For the sample of farmers, average output loss is found to be in the range of 12%.

Keywords: developing countries; expenditure constraint; generalized indirect production function; market distortions; shadow price; O120; O130

Journal Article.  0 words. 

Subjects: Economic Development

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