Abstract
This paper considers a generalised translog cost function, which takes cart of distortions in factor markets due to the regulatory environment in Pakistan's. large-scale manufacturing sector. The paper explores the nature of allocative inefficiencies and evaluates elasticities by employing pooled provincial time-series data of Sindh and Punjab from the CMI. The paper rejects the use of neoclassical assumption of perfect competition in input markets as a maintained hypothesis and argues that price and substitution elasticities produced by previous studies, without incorporating allocative inefficiencies, may be misleading.
