Publicly-funded UK agricultural R&D and 'social' total factor productivity

Most studies concerned with measuring the rate of return to publicly‐funded agricultural R&D investment have found high returns, suggesting under‐investment, and calls for increased expenditure have been common. However, the evaluation of returns tends to measure the effect of research expenditure against growth in total factor productivity (TFP), based on market inputs and outputs. When compared against growing public unease over the environmental effects of pursuing agricultural productivity growth, TFP indices become a misleading measure of growth. This paper integrates some non‐market components into the TFP index. The costs of two specific externalities of agricultural production, namely fertiliser and pesticide pollution, are integrated in a TFP index constructed for the period 1948–1995. This adjusted, or ‘social’, TFP index is measured against UK public R&D expenditures. The rates of return to agricultural R&D are reduced by using the ‘social’ as opposed to the traditional TFP index. Whilst both remain at justifiable levels, previous studies appear to have over‐estimated the effect of agricultural R&D expenditures. Furthermore, with changes in policy towards more socially acceptable but non‐productivity enhancing outcomes, such as animal welfare, rural diversification and organic farming, the future framework for analysing returns to agricultural R&D should not be so dependent on productivity growth as an indicator of research effectiveness.     

Knowledge productivity and the returns to agricultural research: a review

This paper describes the identification, specification, estimation, and evaluation of econometric models of knowledge productivity and the returns‐to‐research. General issues related to these models are discussed and placed in context of the literature. The path from R&D investment to economic benefit is complex, convoluted, generally unknown and possibly misrepresented. The complexity arises from the intricate spatial spillover relationships and the very long time periods involved, which complicate any econometric analysis. The relevant R&D investment data are typically unavailable, incomplete and poorly measured (or approximated). The appropriate calculation of the financial benefit is not entirely clear. Some parsimonious suggestions for future research are presented.     

Research returns redux: a meta-analysis of the returns to agricultural R&D

A total of 289 studies of returns to agricultural R&D were compiled and these provide 1821 estimates of rates of return. After removing statistical outliers and incomplete observations, across the remaining 1128 observations the estimated annual rates of return averaged 65 per cent overall — 80 per cent for research only, 80 per cent for extension only, and 47 per cent for research and extension combined. These averages reveal little meaningful information from a large body of literature, which provides rate-of-return estimates that are often not directly comparable. This study was aimed at trying to account for the differences. Several features of the methods used by research evaluators matter, in particular assumptions about lag lengths and the nature of the research-induced supply shift.     

International and Institutional R&D Spillovers: Attribution of Benefits among Sources for Brazil's New Crop Varieties

Reported rates of return to agricultural R&D are generally high, but they are likely to be biased, particularly because of attribution problems—mismatching research benefits with costs. The importance of attribution biases is illustrated here with new evidence for Brazil. During 1981–2003, varietal improvements in upland rice, edible beans, and soybeans yielded benefits of $14.8 billion in present value (1999 prices) terms. Attributing all of the benefits to Embrapa, a public research corporation accounting for more than half of Brazil's agricultural R&D spending, the benefit-cost ratio would be 78:1. Under alternative attribution rules, the ratio drops to 16:1.     

The Economic impact of public agricultural research and development in the United States

In this article, we examine the relationship between public investments in agricultural research and development and the productivity‐enhancing benefits they generate. Knowledge productivity functions are estimated for U.S. agriculture using data on multifactor productivity and public knowledge stocks. We examine the time‐series properties of the data and compare alternative econometric estimation procedures. The results are used to calculate economic performance measures such as internal rates of return and benefit‐cost ratios. The real rate of return to public investments in agricultural research and development in the United States is in the range of 8–10% per annum.     

The benefits from public agricultural research in Uruguay

We use newly constructed data to model and measure agricultural productivity growth and the returns to public agricultural research conducted in Uruguay over the period 1961–2010. We pay attention specifically to the role of levy‐based funding under INIA, which was established in 1990. Our results indicate that the creation of INIA was associated with a revitalization of funding for agricultural R&D in Uruguay, which spurred sustained growth in agricultural productivity during the past two decades when productivity growth was stagnating in many other countries. The econometric results were somewhat sensitive to specification choices. The preferred model includes two other variables with common trends, a time‐trend variable and a proxy for private research impacts, as well as a variable representing the stock of public agricultural knowledge that entailed a lag distribution with a peak impact at year 24 of the 25‐year lag. It implies a marginal benefit‐cost ratio of 48.2, using a real discount rate of 5 per cent per annum and a modified internal rate of return of 24 per cent per annum. The benefit‐cost ratio varied significantly across models with different lag structures or that omitted the trend or the private research variable, but across the same models, the modified internal rate of return was very stable, ranging from 23 per cent per annum to 27 per cent per annum. These results suggest that the revitalized investment in research spending under INIA has been very profitable for Uruguay and that a greater rate of investment would have been justified.     

Beyond semi-dwarf wheat yield increases: impacts on the Australian wheat industry of on-going spillovers from the International Maize and Wheat Improvement Center

Wheat genetic materials developed from research at the International Maize and Wheat Improvement Center (CIMMYT) in Mexico for developing countries have provided spillover benefits to Australia. Varieties developed from those genetic materials have resulted in yield increases in Australia. While the initial impact came through the introduction of higher-yielding semi-dwarf wheat crops, those impacts have continued in the post-semidwarf period. CIMMYT's success in developing countries has also reduced the world price for wheat. While the lower prices affect returns in Australia, the increased yields in Australia from the CIMMYT spillovers from both the semi-dwarfs and the post-semidwarf phases have provided benefits to Australia averaging A$30 million per year.     

Productivity growth and the returns from public investment in R&D in Australian broadacre agriculture

Investment in R&D has long been regarded as an important source of productivity growth in Australian agriculture. Perhaps because research lags are long, current investment in R&D is monitored closely. Investment in R&D has been flat while productivity growth has remained strong, relative both to other sectors of the Australian economy and to the agricultural sectors of other countries. Such productivity growth, at a time when the decline in terms of trade facing Australian farmers has slowed, may have enhanced the competitiveness of Australian agriculture. The econometric results presented here suggest no evidence of a decline in the returns from research from the 15 to 40 per cent per annum range estimated by Mullen and Cox. In fact the marginal impact of research increases with research over the range of investment levels experienced from 1953 to 2000, a finding which lends support to the view that there is underinvestment in agricultural research. These results were obtained from econometric models which maintain strong assumptions about how investments in research and extension translate into changes in TFP. Hence some caution in interpreting the results is warranted.     

The importance of ecological and socio-technological literacy in R&D priority setting: the case of a fruit innovation system in Guinea,West Africa

The introduction of farmer participatory approaches over the past decades has to some extent improved the relevance and uptake of research results. While R&D prioritization increasingly involves more stakeholders, including the private sector, policymakers and civil society, building ecological literacy among all stakeholders is urgent, especially for sustainable agricultural development. A case study of an emerging fruit innovation system in Guinea, West Africa, highlights the challenges of supply- and demand-driven approaches to R&D prioritization. Shallow ecological knowledge and a blind faith in ‘modern’ technologies by scientists and farmers alike distort prioritization. Locally available, appropriate technologies are dismissed in favour of high technologies that are inaccessible to most smallholder growers. Strengthening the ecological literacy of all stakeholders may help to overcome this bias. On the other hand, building socio-technological literacy would allow innovation intermediaries, who typically act as brokers between the demand- and supply-side of technologies, to better understand the social and institutional contexts of technologies and how these affect potential uptake by poor farmers. Member centres of the Consultative Group on International Agricultural Research (CGIAR) could use the notion of ecological and socio-technological literacy to better understand supply and demand of technology and to work more effectively with their partners towards pro-poor and sustainable agricultural development.     

Financing agricultural R&D in rich countries: what's happening and why

Governments everywhere are trimming their support for agricultural R&D, giving greater scrutiny to the support that they do provide, and reforming the public agencies that fund, oversee, and carry out the research. This represents a break from previous patterns, which had consisted of expansion in the public funds for agricultural R&D. Private-sector spending on agricultural research has slowed along with the growth of public spending in recent years, but the balance continues to shift towards the private sector. This article presents a quantitative review of these funding trends and the considerable institutional changes that have accompanied them. We discuss new data for 22 OECD countries, providing institutional details for five of these countries, and conclude with an assessment of policy developments.     

Modeling the length and shape of the R&D lag: an application to UK agricultural productivity

This article updates total factor productivity (TFP) growth in UK agriculture from 1953–2005 and shows that public and private research and returns to scale explain TFP. Cointegration and causality tests are used to investigate the validity of attempts to explain UK agricultural productivity with R&D and related technology variables. Then, the length and shape of the lag structures are modeled and compared with the structures that are commonly imposed on the data. The rates of return (ROR) to R&D using the data determined lags differ considerably from those obtained by imposing lag shapes. These comparisons show that the ROR to public R&D are sensitive to the lag shape as well as its length and that the omission of other technology variables, such as mechanical and chemical patents pertaining to agriculture and farm size can bias the ROR.     

Returns to spending on agricultural extension: the case of the National Agricultural Advisory Services (NAADS) program of Uganda†

The aim of this paper is to assess the direct and indirect impacts of the agricultural extension system of Uganda, the National Agricultural Advisory Services (NAADS) program, on household agricultural income. Data from two rounds of surveys of Ugandan rural farm‐households conducted in 2004 and 2007, as well as different program evaluation methods and model specifications, are used to estimate impacts and compute a rate of return. The direct and indirect impact of the program is estimated at 37–95% and 27–55% increase in per capita agricultural gross revenue between 2004 and 2007 for households participating directly and indirectly in the program, respectively, compared to nonparticipants. The rate of return on the program's expenditures is estimated at 8–49%. The program has been relatively more effective among male‐headed, larger, and asset‐poor households, as well as those taking up noncrop high‐value enterprises and living further away from financial services, all‐weather roads, and markets or located in the Eastern and Northern Regions. Policy implications of the results are drawn.     

The roles of public sector versus private sector in R&D and technology generation: the case of maize in Asia

This paper reports the findings of a study whose objectives were to compare and contrast the public and private sectors in Asia in terms of their (1) estimated level of investment in maize breeding research; (2) germplasm outputs; and (3) nature and extent of roles played in the maize seed industry. Since the 1960s, yield gains, rather than area expansion, have fuelled increases in maize production in Asia. Yield gains, in turn, have been due to the shift in maize cultivation from mostly open‐pollinated varieties (OPVs) to mostly hybrids. This transition also shifted the locus of modern maize breeding research from government research organisations to private national and multinational seed companies. In countries where both the public and private sectors participated in maize research, private sector research investment far exceeded that of the public sector. With more aggressive marketing programmes, the private sector captured 89% of the Asian maize seed market in the late 1990s. National public seed research agencies (including universities and cooperatives) developed and produced more maize OPVs than hybrids, mass‐produced and distributed seed cheaply, addressed location‐specific production problems, and provided agricultural extension services. The private seed companies developed, produced, sold and promoted their own proprietary hybrids. The reluctance of the private sector, however, to address the needs of marginal maize farmers should encourage the public sector to continue playing an active role in maize research and development (R&D), seed production and modern maize technology dissemination, especially with adequate support from appropriate government policies.     

Policy directions for agricultural land use in Australia and other post-industrial economies

Farming has been the basis to work, culture and social forces for millennia. It still dominates the lives of most of the world's poorer people, but in post-industrial western countries agriculture's contribution to national economies is now minor. Nevertheless, most OECD countries’ agricultural policies are aimed at maintaining the size of this sector even where this conflicts with its economic significance or adversely affects the environment. Australia has a first world economy, but a third world export profile, with 20% of its export value derived from agriculture. Although it is efficient in agricultural man-power, this sector consumes 70% of the water and 60% of the land resources of the continent to produce food for an estimated 55 million people. Agricultural policies maintain the productivity of the sector, but are ineffective in stemming the associated environmental degradation, biodiversity loss and rural population decline. As in other post-industrial societies, Australia needs to re-define what its agriculture sector represents, environmentally and socially. This will require greater reappraisal of property rights, public and private benefits and legal structures supporting both. More effective alternative policies are needed for large tracts of unproductive farmland where environmental and social decline are endemic. This paper explores alternative options that offer more balanced prospects in the face of current paradoxes, including paying farmers directly for stewardship services, providing better incentives for retiring non-productive areas from agricultural land use, and retiring watersheds, streamlines and other areas of essential environmental function from agricultural production for better biodiversity conservation.     

Cointegration and causality in international agricultural economics research

A review of literature on applications of Granger causality to problems in international agricultural economics research is summarized. The review relates to cointegration theory, and it identifies the areas where recent econometric developments may be of value. Testing procedures are outlined, and a discussion is provided on questions such as non-stationarity and asymptotic distribution of non-causality tests, the relationship between cointegration and causation, the relative merits of various testing procedures, and concerns about testing bivariate causality in higher dimensional models. Finally, a recent econometric development is discussed and its future use in applied research is discussed.     

Conversion of agricultural and forest land to other purposes in the context of land protection: Evidence from Polish experience

The protection of agricultural land and forests is a relatively new concept in Poland, and it began with forest protection in the 1920s. The first regulations on the protection of agricultural land were introduced only in the 1960s. Agricultural land and forests received comprehensive protection pursuant to the provisions of the Act of 26 October 1977 on the protection of agricultural land, forests and land recultivation. This legal act set the foundations for the protection of farmland and forests in successive decades.The aim of this study was to determine the influence of farmland and forest protection on spatial planning and to highlight the loss of agricultural and forest land resulting from conversion to other purposes. Legal regulations pertaining to spatial planning and the protection of agricultural and land forests were analysed. The scale of the problem was identified, and future land-use types were forecast based on the data developed by Statistics Poland (GUS). The existing spatial plans (municipal master plan - MMP) were analysed to determine the conversion loss index (CLI) associated with the conversion of agricultural land and forests to other uses. Legal regulations pertaining to the protection of agricultural land and forests were also analysed, and the extent of the relevant conversion measures was determined. The study demonstrated that urban development and the inevitable urbanization of rural areas contribute to the loss of agricultural and forest land that are converted to other uses.     

Towards an Integration of R & D and Marketing in Production Development

Abstract

In this paper, two approaches which are characteristic for Research & Development and Marketing departments are compared. First, R&D versus Marketing orientations are explained, then the major differences between them are presented. The integration of both approaches may improve competitive advantage of the food industry. Factors stimulating such integration are presented on the basis of data from real business circumstances. Innovation is regarded as a major source of competitive advantage of company. Therefore, integration in sensory methodology, that is commonly but differently used by R & D and Marketing departments, may contribute to the improvement of innovation practices and successful business performance. Finally, the role of consumer tests, oriented for marketing and product development, is illustrated.     

`Post-Feudalism’ and the changing structure of agricultural leasing

This paper examines the extent to which recent observations about the declining power of landowners signals the arrival of a post-feudal structure in world agriculture. Using the findings of a desk study of lease arrangements across four continents, the paper shows that, although there are substantial cultural and customary differences in the ways in which agricultural leases have developed, three broad systems can be delineated. These are characterised as: the `feudal’ system, in which landowners remain dominant; a neo-feudal system which, while underwriting private landowning, attempts to combine commercial agriculture with the maintenance of an open and vibrant lease sector; and a post-feudal system, based on improving the financial and technical efficiency of the farming industry. Using this classification, the paper explores the key determinants of the types of lease system which have emerged. It suggests that the suitability of any given system is a function of the overall policy objectives established for the sector. On this basis the paper rejects western constructs of a linear progression from feudalism to post-feudalism. Rather, it suggests that, as both extreme systems are open to exploitation, long-term stability and flexibility is most likely to occur under a neo-feudal regime in which government assumes a pivotal role in supporting both landowners and tenants.     

Measurement errors in agricultural data and their implications on marginal returns to modern agricultural inputs

The low uptake of modern agricultural technologies in sub-Saharan African countries has encouraged researchers to revisit the returns to (or profitability of) these agricultural inputs. A related strand of literature is exploring the allocative efficiency of these factors of production in African agriculture. However, all these studies rely on self-reported agricultural data, which are prone to nonclassical measurement errors, the errors in these data are correlated with the true values of variables of interest. In this article we investigate the implication of measurement errors in self-reported agricultural input and production data on marginal returns to these modern agricultural inputs. We consider a generic two-sided measurement error problem where both production and inputs can be measured with error, and these errors can be correlated. We employ both self-reported and objective measures of production and plot size to compute output elasticities under these alternative measurement scenarios. We find that using self-reported production and plot size overestimates output elasticities and hence marginal returns to modern agricultural inputs (including chemical fertilizer and improved seed). These results are noteworthy in terms of informing conventional technology diffusion strategies as well as in view of revisiting existing presumptions about the profitability of modern agricultural inputs.