An empirical analysis of sugarcane production in Pakistan

Abstract

In this study an effort is made to estimate a supply response function for sugarcane output. The present study employs Nerlovian expectation model to measure long run and short run supply response elasticities. The study also takes an appraisal of Pakistan sugar industry for evaluating government policies. Over the years, government has encouraged sugar manufacturing by maintaining high domestic prices relative to the cost of imported sugar through a government monopoly and, later, regulatory policies. The selected variables are not in same order of integration and thus for empirical analysis an Auto Regressive Distributive Lag (ARDL) model is applied using the time series data for the period 1970 to 2014. The results of our regression confirmed the existence of long run relationship among the selected variables and sugarcane production. The area harvested availability of canal water and support price of sugar were the most significant factors with positive signs indicating a positive relationship with sugarcane production.