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.
