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.     

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.     

External and Internal R&D,Capital Investment and Business Performance in the Spanish Agri‐Food Industry

We examine the effects of external and internal expenditure on research and development on the business performance of industrial agri‐food enterprises. For this purpose, a data sample from the Encuesta de Estrategias Empresariales en España (Survey of Business Strategies in Spain) was used, which includes information on more than 400 businesses over the period 2000–2008. The econometric analysis uses quantile regressions to address the vast asymmetry of the variables and to identify non‐linear relationships. The results reveal interesting new findings on the impacts of R&D on the agri‐food industry. The most evident, although not the most immediately apparent, relationship concerns the positive effects of external R&D on business performance. Internal R&D was also revealed to be an important way of enhancing the productivity of SMEs. In addition, the modernisation of the production process through investment in capital goods continues to be the main path to improve competitiveness. However, support was found neither for the inverse relationship, that is the most profitable firms are those that spend the most on R&D, nor for complementarity between external and internal R&D. The latter would imply that the bulk of Spanish agri‐food firms have at most the capacity for only one type of R&D.     

The research cost of adapting agriculture to climate change: A global analysis to 2050

Investments in agricultural research and development (R&D) made over the next few decades will likely prove critical in offsetting adverse climate change impacts on the global food system. In this study, we offer cost estimates of public R&D-led adaptation to climate change grounded in an explicit framework relating the flow of annual R&D expenditures to building knowledge capital and thereby raising productivity in agriculture. Our research uses a comprehensive collection of historical public agricultural R&D expenditure and a literature review of elasticity estimates linking knowledge stocks to agricultural productivity growth for key world regions. Given climate-driven crop yield projections generated from extreme combinations of crop and global circulation models, we find that offsetting crop yield losses projected by climate and crop models over 2006–2050 would require increased R&D adaptation investments of between $187 billion and $1,384 billion (in 2005 $PPP) if we invest between 2020 and 2040. This is 16–118% higher than global R&D investment if present spending trends continue. Although these costs are significant, worldwide R&D-led climate adaptation could offer favorable economic returns. Moreover, R&D-led adaptation could deliver gains in food security and environmental sustainability by mitigating food price increases and slowing cropland expansion.     

Payoffs from research and development along the Australian food value chain: a general equilibrium analysis

The payoffs and distribution of payoffs from research and development (R&D) along the food value chain depend on many interacting economic factors. To quantify these, we have developed a general equilibrium model of the Australian economy with detailed farming, processing and marketing information. We use the model to assess potential payoffs and distributions from various R&D scenarios that lead to demand expansion and productivity improvement. We find that productivity improvement caused by R&D is unambiguously beneficial to the whole economy while the benefits of export or domestic market demand expansion mainly accrue to the primary producers and processing industry, when the economy is at full employment. Also, productivity improvement from R&D on‐farm may benefit processors while improvements postfarm may benefit farmers.     

Research and productivity in Thai agriculture

This paper examines the impact that publicly funded agricultural research has on productivity in crop production within Thailand. It tests empirically the two hypotheses that, first, publicly funded research and development (R&D) in crop production is a significant determinant of total factor productivity (TFP) in the crop sector and, second, that its social rate of return is high. The statistical analysis applies error correction methods to national level time series data for Thailand, covering the period 1970–2006. Emphasis is given to public research in crop production, where most publicly funded agricultural R&D has occurred. The role of international research spillovers and other possible determinants of TFP are also taken into account. The results demonstrate that public investment in research has a positive and significant impact on TFP. International research spillovers have also contributed to TFP. The results support the finding of earlier studies that returns on public research investment have been high. This result holds even after controlling for possible sources of upward biases present in most such studies, due to the omission of alternative determinants of measured TFP. The findings raise a concern over declining public expenditure on crop research, in Thailand and many other developing countries.     

The transformation of the Indian agricultural input industry: has it increased agricultural R&D?

Indian agricultural input industries have gone through a major transformation in the last 40 years. State owned firms grew during the Green Revolution and then stagnated or declined. Indian corporations that were protected from foreign competition are now exporters of agricultural tractors and pesticides. Foreign multinational corporations are rapidly increasing their role in the seed, pesticide, and tractor industries. Entry by large Indian firms and multinationals has increased competition in the input industries. Private agribusiness R&D in India grew from $23 million in 1985 to $250 million in 2009 in 2005 US dollars. This is the same time period as a transformation in the agricultural input industry, rapid growth in demand for agricultural inputs, breakthroughs in information technology and biotechnology, and changes in intellectual property rights. An econometric model was used to test whether the transformation of agricultural input industry was a major factor in the growth of R&D expenditure or not. This article analyzes a unique, firm level sales and R&D data set from the seed, pesticide, tractor, and fertilizer industries in 2000–2009. The estimated model indicates that agribusiness firms' R&D expenditures from 2000 to 2009 were positively related to variables associated with industry transformation such as firm size, ownership by multinationals, and declining industry concentration. The model also indicates that strengthening patent policy as well as growth in the size of research‐intensive industries like the seed industry contributed to the growth of agribusiness R&D in India.     

Exploring the impact of R&D and climate change on agricultural productivity growth: the case of Western Australia*

This article empirically examines the impact of R&D and climate change on the Western Australian Agricultural sector using standard time series econometrics. Based on historical data for the period of 1977–2005, the empirical results show that both R&D and climate change matter for long‐run productivity growth. The long‐run elasticity of total factor productivity (TFP) with respect to R&D expenditure is 0.497, while that of climate change is 0.506. There is a unidirectional causality running from R&D expenditure to TFP growth in both the short run and long run. Further, the variance decomposition and impulse response function confirm that a significant portion of output and productivity growth beyond the sample period is explained by R&D expenditure. These results justify the increase in R&D investment in the deteriorating climatic condition in the agricultural sector to improve the long‐run prospects of productivity growth.     

Recalibrating the reported returns to agricultural R&D: what if we all heeded Griliches?*

Zvi Griliches’ seminal analysis of hybrid corn spawned a large literature seeking to quantify and demonstrate the value of agricultural research and development (R&D) investments. The most important metric for quantifying the rate of return to R&D emerging from this literature is the internal rate of return (IRR), even though Griliches was sceptical of its usefulness as a metric in this context. An alternative metric, also reported by Griliches but not as commonly used in the subsequent returns‐to‐research literature, is the benefit–cost ratio (BCR). We assess how the implications of the returns to agricultural R&D literature may have differed if the BCR had become the standard rather than the IRR. We reveal that the IRR and BCR produce substantially different rankings of agricultural R&D projects, differences that persist even under various commodity and geographical aggregations of the BCR and IRR estimates. The median across 2,627 reported IRRs is 37.5 per cent per year. Using data gleaned from 492 research evaluation studies, we developed and deployed a methodology to impute 2,126 BCRs (median of 5.4) and modified internal rates of returns (MIRRs, median of 16.4 per cent per year) assuming a uniform 10 per cent per year discount rate and a 30 year research timeline.     

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.     

Exploring the widening food gap: an international perspective

Using data for a long panel of 90 developed and developing countries, this article explores the effects of research and development (R&D) and fixed capital stock on agricultural land productivity over the period 1961–2012. Instruments are used for R&D to deal with feedback effects and measurement errors. The results show very high social returns to investment in R&D and to fixed capital stock, suggesting that increasing investment in these factors are promising ways of arresting the increasing food prices due to increasing demand for animal protein, population growth, desertification, salinization, soil erosion, climate change, and decreasing growth in land productivity.     

Underinvestment in Producer‐Funded Agricultural R&D: The Role of the Horizon Problem

Agricultural research and development (R&D) investment has become an increasingly important policy issue as food prices increased and food security problems emerged over the last decade. An important source of agricultural R&D funding is the producer check‐off, which is increasingly being used to fund applied agricultural research. Existing studies of producer‐funded agricultural R&D indicate there are high private rates of return to agricultural R&D investment by farmers, and thus farmers are underinvesting in R&D. Since a farmer's time horizon is typically less than the period of time over which the benefits of agricultural R&D take place, the horizon problem has been identified as a possible factor in this underinvestment. This paper shows that the horizon problem is unlikely to be the only cause of the underinvestment when the internal rate of return is large. Instead, shortened producer horizons only emerge as the main source of underinvestment when the internal rate of return is low. As a result, other factors, including behavioral determinants, need to be looked at as contributors to the underfunding of agricultural R&D. Les investissements en recherche et développement agricoles sont devenus un important enjeu politique étant donné l'augmentation des prix des aliments et les problèmes de sécurité alimentaire de la dernière décennie. Une importante source de financement pour la recherche et le développement dans le domaine agricole sont les programmes de contribution des producteurs, ces derniers étant de plus en plus sollicités pour financer la recherche agricole appliquée. Certaines études portant sur la recherche et le développement agricoles financés par les producteurs indiquent un haut taux de rendement privé des investissements en recherche et développement agricoles par les producteurs. Ces derniers y investissent donc moins. Puisque l'échéancier de l'agriculteur est typiquement moins long que celui pendant lequel les avantages liés à la recherche et au développement dans le domaine agricole s'échelonnent, le problème de l'horizon a été identifié comme facteur potentiel au sous‐investissement. Il est probable, selon cet article, que le problème de l'horizon ne soit pas la seule cause du sous‐investissement lorsque le taux interne de rendement s'avère grand. Plutôt, les échéanciers réduits des agriculteurs apparaissent seulement comme les sources principales de sous‐investissement lorsque le taux de rendement interne est bas. Il en résulte que d'autres facteurs, incluant les déterminants comportementaux, doivent être examinés à titre de contributeurs au sous‐investissement de la recherche et du développement en agriculture.     

The public R&D and productivity growth in Australia's broadacre agriculture: is there a link?

This paper investigates the dynamic relationships between research and development (R&D) expenditure and productivity growth in Australian broadacre agriculture using aggregate time series data for the period 1953 to 2009. The results show a cointegrating relationship between R&D and productivity growth and a unidirectional causality from R&D to TFP (total factor productivity) growth in Australian broadacre agriculture. Using the dynamic properties of the model, data from beyond the sample period are analysed by employing the variance decomposition and the impulse response function. The findings reveal that R&D can be readily linked to the variation in productivity growth beyond the sample period. Furthermore, the forecasting results indicate that a significant out‐of‐sample relationship exists between public R&D and productivity in broadacre agriculture.     

Impact of research investment on Cassava production technologies in India*

The present study was an ex‐post assessment done to validate past funding on cassava research, based on economic surplus approach. Though cassava was introduced as a food crop in Kerala, India from Brazil, it has changed its status to commercial crop at present in Tamil Nadu and Andhra Pradesh states. This was made possible due to intensive research and development efforts of different R&D organizations. Cassava technologies developed enabled in sustaining the crop in the country with the world’s highest productivity. All the cassava production technologies considered in the study resulted in an economic surplus of Rs.3585.87 million in the target domain covering Kerala, Tamil Nadu and Andhra Pradesh. Consumers and producers benefited to the tune of Rs.2090.64 million and Rs.1495.23 million respectively. Net present value of economic gains was estimated to be Rs.3548.76 million. Present value of research investment on cassava production technologies was Rs.37.11 million resulting in benefit cost ratio of 96.63:1 with a high internal rate of return of 104 per cent. Thus the study indicated that the research investments incurred on cassava production technologies development was highly economical and provided evidence to the policy makers that supporting the research investment on underground, under exploited tropical root crops like cassava is an economically viable proposition.     

The Evolving Structure of Chinese R&D Funding and its Implications for the Productivity of Agricultural Biotechnology Research

China’s research and development (R&D) policy has changed considerably over recent decades, and great changes occurred in 2006 when the main programme objective of China’s R&D changed from the 863 Programme and 973 Programme to the National Science and Technology Major Project. One topic that has drawn extensive attention is whether the investment reform improved R&D productivity in China. Using a unique panel dataset from 160 universities, this paper examines the effect of the investment reform on productivity improvement in China’s agricultural biotechnology sector. We use a panel count data model with a dynamic feedback mechanism to model the knowledge production process. Strong evidence indicates that the investment reform greatly contributes to knowledge output production in China’s agricultural biotechnology sector. We also find that the input quality is more important than the absolute quantity; human research capacity exhibits the greatest contribution to the output of patents; past knowledge accumulation helps produce more patents; and entry barriers to patent production exist in China’s agricultural biotechnology sector. Moreover, the patent explosion in China may have been largely caused by improvements in the human capital input quality.     

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.     

Getting Institutions "Right" for Whom? Credit Constraints and the Impact of Property Rights on the Quantity and Composition of Investment

Property rights reform is typically hypothesized to boost investment through investment demand and credit supply effects. Yet when the credit supply effect is muted, property rights reform would be expected to induce liquidity-constrained farms to reduce investment in movable capital even as they increase investment in attached capital. This expectation is corroborated by econometric analysis of panel data from Paraguay. While all farmers experience a positive investment demand effect, liquidity-constrained producers correspondingly reduce their demand for movable capital. Given an estimated pattern of wealth-biased liquidity constraints, property rights reform will get institutions "right" for only wealthier producers.     

NET INVESTMENT IN AGRICULTURAL TRACTORS

This essay considers investment in agricultural tractors in the UK, and examines and compares econometric models of investment. A net investment series is calculated from quality-adjusted gross investment figures, showing limited negative net investment over time but with substantial variability. Four time-series modelling techniques are compared as representations of the demand for tractors over the period 1964 to 1990; these are the accelerator (clay-clay), neo-classical (putty-putty), expectations augmented neo-classical (putty-clay) and ad hoc models. Model results support the use of an expectations augmented, neo-classical model of net investment in a partial adjustment framework. Future expectations of agricultural policy are considered as a major influence on investment, an aspect that backwards-looking expectations models only partially represent.     

The determinants of outward foreign direct investment: a firm‐level analysis of Indian manufacturing

This paper analyses the determinants of the overseas direct investment activity of Indian manufacturing enterprises. In general, several firm‐specific characteristics such as age, size, R&D intensity, skill intensity and export orientation are observed to be important explanatory factors in the outward foreign direct investment (O‐FDI) activity of Indian firms. The impact of age and size on O‐FDI has been observed to be non‐linear. The product differentiation activities and the productivity of firms are other useful factors in overseas production expansion in certain industries. The study reveals that the performance of these firm‐specific variables is subject to sectoral dynamics. Internationalization of production activities of Indian firms has been observed to be partly fuelled by policy liberalization during the 1990s.     

Measuring public agricultural research and extension and estimating their impacts on agricultural productivity: new insights from U.S. evidence

This article provides new estimates of the marginal product of public agricultural research and extension on state agricultural productivity for the U.S., using updated data and definitions, and forecasts of future agricultural productivity growth by state. The underlying rationale for a number of important decisions that underlie the data used in cost‐return estimates for public agricultural research and extension are presented. The parameters of the state productivity model are estimated from a panel of contiguous U.S. 48 states from 1970 to 2004. Public research and extension are shown to be substitutes rather than complements. The econometric model of state agricultural TFP predicts growth rates of TFP for two‐thirds of states that is less than the past trend rate. The results and data indicate a real social rate of return to public investments in agricultural research of 67% and to agricultural extension of 100+%. The article concludes with guidance for TFP analyses in other countries.