An Analysis of Economies of Scope in Irrigated Agriculture in the Punjab (Pakistan)

In this paper scope economies for a sample of 387 farms in the Punjab province of Pakistan were estimated using nonparametric techniques and sources of economies of scope were determined by using econometric techniques. The result indicated that diversified farming in crop, livestock and custom hiring enterprises results in cost savings of 17.81% for all enterprises, 17.36% in the crop sector, 15.84% in the livestock sector and 1.90% for custom hiring. Econometric results indicate that overall economies of scope are inversely related to farm size, positively to location of farms nearer to the head reaches of canals and positively to the amount of capital used on a farm. The existence of Scope economies in Pakistan agriculture implies that production functions in agriculture are interdependent and the effects of Government policy of setting support prices of individual crops may affect resource allocation with respect to other crops on the same farms.