The Price Response of Major Crops in Pakistan: An Application ofthe Simultaneous Equation Model

This paper specifies a model to simultaneously estimate the price response, assuming an interdependence among crops. The model is applied to estimate own and cross-price elasticizes of five major crops in Pakistan, viz., wheat, cotton, rice, sugarcane, and maize based on the production and expected wholesale price data for the period 1957-86.The study found little potential to· enhance overall agricultural productivity by increasing the single crop price, sill Ce either the own price elasticizes were low or, otherwise, the negative cross-price effects on the production of other crops were high. However, a100percent system at;; improvement in terms of trade for agriculture will increase overall agricultural productivity by about 6 percent in the long run.