GOVERNMENT INTERVENTIONS, MARKET IMPERFECTIONS, AND TECHNICAL INEFFICIENCY IN A MIXED ECONOMY - A CASE-STUDY OF INDIAN AGRICULTURE

This paper uses an output-maximizing framework in the presence of expe nditure constraint to measure output loss and input misallocation resu lting from market distortions and technical inefficiency. A generalize d indirect production function accommodating allocative distortions an d technical inefficiency is used. Allocative distortions are captured in terms of effective (shadow) prices in which distortion parameters a re both farm- and input-specific. The stochastic frontier approach is used to model technical inefficiency. Using farm-level data on 105 jut e growers from West Bengal, India, we find that average output losses due to allocative distortions and technical inefficiency are 6.3% and 14%, respectively. (C) 1996 Academic Press, Inc.