Open AccessComparative Advantage of Major Crops Production in Punjab: An Application of Policy Analysis Matrix
Author(s) -
Muhammad Abdul Quddus,
Usman Mustafa
Publication year - 2011
Publication title -
the lahore journal of economics
Language(s) - English
Resource type - Journals
eISSN - 1811-5446
pISSN - 1811-5438
DOI - 10.35536/lje.2011.v16.i1.a3
Subject(s) - comparative advantage , production (economics) , profitability index , economics , agriculture , agricultural economics , revealed comparative advantage , benefit–cost ratio , agricultural science , business , international trade , internal rate of return , biology , ecology , finance , macroeconomics
This study uses data from 1999/2000 to 2004/05 to determine therelative efficiency of major crops (wheat, rice, sugarcane, and cotton) in Punjab(Pakistan) and their comparative advantage in international trade as measuredby economic profitability and the domestic resource cost (DRC) ratio. Aneconomic profitability analysis demonstrates that Punjab has a comparativeadvantage in the domestic production of wheat for self-sufficiency but not forexport purposes. In basmati production, Punjab has a comparative advantage,and increasing Basmati production for export is a viable economic proposition.The nominal protection coefficient (NPC), effective protection coefficient (EPC),and DRC for Irri rice are more than 1: the given input-output relationship andexport prices do not give Punjab a comparative advantage in production of Irrifor export. Sugarcane growers did not receive economic prices (i.e. pricesreflecting true opportunity costs) during 2001/02 and 2002/03 in an importingscenario, while in 2003/04, the NPC was 1.02, indicating positive support tosugarcane growers. The NPCs estimated under an exporting situation rangefrom 1.33 to 1.99, indicating that the prices received by growers are higher thanthe export parity/economic prices.