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Anatomy of Input Demand Functions for Indian Farmers across Regions

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  • Shrabani Mukherjee
  • Kailash Chandra Pradhan

Abstract

This study models the optimum use of production inputs and analyse the behaviour of input demand functions of agricultural production through restricted transcendental logarithm profit function for four different regions in India using rural economic and demographic survey (REDS) data. The Seemingly Unrelated Regression (SUR) method of estimation reveals that the level of productivity of farms is significantly influenced by output prices, inputs like labour, fertilizer, pesticides. The results of ownprice elasticities for the demand of variable inputs are negative and price elastic. Fertilizer prices and area planted had a significant impact on the profit function altogether. The effect of output prices in eastern region is larger. Whereas, wage rate and other input prices are more effective for other regions. The cross-price elasticities for input indicated imperfect complementary relationships among the inputs. A well designed input distribution policy can mitigate the problem of low factor productivity and lack of technological improvements in agriculture. [Working Paper 150/2016]

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  • Shrabani Mukherjee & Kailash Chandra Pradhan, 2016. "Anatomy of Input Demand Functions for Indian Farmers across Regions," Working Papers id:11169, eSocialSciences.
    • Handle: RePEc:ess:wpaper:id:11169
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    More about this item

    Keywords

    Agriculture; Restricted Translog Profit function; Input Demand; Seemingly Unrelated Regression; India; low factor productivity; technological improvements; distribution policy; inputs; cross-price; elasticities; regions;
    All these keywords.

    JEL classification:

    • C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs

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