Tests of the profit‐maximisation hypothesis: A study of Indian agriculture

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Abstract
The paper presents econometric tests of a neoclassical competitive profit function model using Farm Management Studies data from the Ferozepur district of Punjab (India) for 1969/70. The aim of the paper is twofold: firstly, to test for differences in production and market behaviour of small (tenant) and large (owner) farms, and secondly, to test the validity of competitive profit‐maximising models for the agricultural sector of a less developed country. The model is estimated by Zellner's ‘Seemingly Unrelated Regressions’ method with restrictions within and across equations. Our results suggest that the neoclassical model works very poorly and that we need to explore alternative avenues of research.

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