Tests of the Profit-Maximisation Hypothesis: A Study of Indian Agriculture

  • P. N. Junankar


The aim of this paper is to compare the behaviour of small and large farms, and tenant and owner farms, using a ‘Restricted Profit Function’ approach. I shall use econometric techniques to test whether different groups of farmers maximise profits to the same extent and whether there are any differences in their technical efficiency. The data used are from the Farm Management Studies for the Ferozepur district of Punjab for 1969/70. In this section I shall outline some of the arguments that have been put forward to suggest that different groups of farmers behave differently and/or do not face the same technological constraints. In Section II, I shall outline the restricted profit function approach and distinguish between technical, price and economic efficiency. Section III is a discussion of the data being used in this paper and some conceptual problems of measurement. In Section IV I present the econometric results and discuss the limitations of the restricted profit function approach. Finally, Section V concludes the paper with some remarks on the appropriateness of a competitive profit-maximising model as applied to the agricultural sector of a less developed country such as India.


Wage Rate Farm Size Profit Function Large Farm Family Labour 
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© Taylor and Francis 1980

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  • P. N. Junankar

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