Estimation of Indirect Production Functions and Investigationof Budget Restrictions Existence in The production of Irrigated and Dry-land Wheat in Kurdistan Province

Wheat is one of the strategic products in Iran and province of Kurdistan. One of the restrictions that agricultural producers face is limited financial resource. This will affect the farmers ability to buy inputs and maximize production. Therefore, in this study, indirect production function with Translog functional form for dry-land wheat and Almost Ideal Supply System (AISS) functional form for irrigated wheat used to determine the amount of budget restrictionand its effect on production. For this purpose, the data of price and quantity of the inputs and the output of irrigated and dry-land wheat were used during 1991-2011. The results showed that the Lagrange multipliers for the productswere greater than one that indicates the existence of budget restrictionin the production of irrigated and dry-land wheat. Budget restrictions have caused the amount of dry-land and irrigated wheat to decrease by 31 and 34 percent,respectively, muchlower than the optimum level. With attention to considering agricultural potential in Kurdistan province, it is recommended to provide financial support for wheat producers through more extensive credit program.