Analysis of conomic Efficiency and Competitiveness of the Rice Production Systems of Pakistan’s Punjab

Abstract

The Policy Analysis Matrix (PAM) methodology was used to determine the level of economic efficiency and competitiveness in the production of rice crops in Pakistan’s Punjab. The methodology was also used to assess the effect of policy intervention on the production of Basmati and IRRI rice crops. The results indicate that an expansion of the production of Basmati rice can lead to an increase in exports. The production of IRRI in Pakistan’s Punjab is characterized by a lack of economic efficiency implying inefficient use of resources to produce the commodity. On the other hand, both Basmati and IRRI rice production in the Punjab demonstrate a lack of competitiveness at the farm level for the period under analysis. The analysis shows that the prevailing incentive structure affected farmers negatively. A negative divergence between private and social profits implies that the net effect of policy intervention is to reduce the farm level profitability of both rice production systems in Punjab. The results highlight the need for removing existing policy distortions in the structure of economic incentives to enhance economic efficiency and to attain farm level competitiveness in rice production.