Volume 10, Issue 1 (2010)
QJER 2010, 10(1): 0-0 |
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Sadeghi H, Ferouzan Sarnaghi T. Effects of Allocative Inefficiency on Input Substitution in Iran's Manufacturing Sector. QJER 2010; 10 (1)
URL: http://ecor.modares.ac.ir/article-18-12134-en.html
URL: http://ecor.modares.ac.ir/article-18-12134-en.html
1- management and economics Faculty, Tarbiat Modares University
Abstract: (5244 Views)
According to the neoclassical approach, input prices as a measure of resources scarcity induce firms to cost-minimizing and efficient allocation of recourses. But when the prices are distorted, the effective competitive inputs are used inefficiently and have resulted in under- or over-utilization of production factors relative to their endowments or allocative inefficiency.
In this paper, the shadow cost approach and system of equations are used to estimate allocative inefficiency using the Iran's manufacturing data over the period 1976-2006. The results show that there is strong allocative inefficiency and increasing cost of production of firms in Iran's Manufacturing Sector.
Keywords: C32, C32, D21, D21, D24 O14, Price Distortion, Allocative Inefficiency, Shadow cost function, Input Markets, Manufacturing Sector
JEL Classification: C30, D24, O14
Received: 2010/05/10 | Accepted: 2010/05/10 | Published: 2010/05/10
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