Agricultural Research Sustains Productivity Growth
and Earns High Returns
Keith
Fuglie and Paul
Heisey
Over the last several decades, the U.S. agricultural
sector has sustained a high rate of productivity
growth, driven largely by the Nation’s agricultural
research system, encompassing Federal-State public
research as well as private research (see
chart). Economic analysis finds strong and consistent
evidence that investment in agricultural research
has yielded high returns per dollar spent. These
returns include benefits not only to the farm sector
but also to the food industry and consumers in the
form of more abundant commodities at lower prices.
While studies give a range of estimates of returns
to agricultural research, there is a consensus that
the payoff to society from the government’s
investment in agricultural research has been high.
ERS analyzed findings from 27
studies that estimated the economic return to public
agricultural research in the United States. These
studies assessed both farm sector and economy-wide
impacts. Although study methodology and coverage
varied, more than four out of five of the estimated
rates of return to research ranged between 20 and
60 percent, with a median estimate of 45 percent.
This is an exceptional return on a public investment,
given that a common benchmark for such investments
is 3 to 4 percent per annum (the interest paid on
government borrowing).
Research is an investment that
pays off slowly over time as innovations are developed
by scientists and adopted by farmers, providing
long-term economic benefits (as long as 30 years).
Given the cost of public funds and the median estimate
of the rate of return to public research from the
reviewed studies, each dollar spent on public agricultural
research has returned roughly $10 in benefits to
the economy. Furthermore, the studies found that
these benefits are shared widely throughout the
economy. As a result, the social returns earned
by investments in agricultural research are likely
to be much higher than the private returns a company
could earn from such investments.
Returns to research have been
high for most crop and livestock commodities. Furthermore,
technology developed in one State or region is often
applied in other regions or countries. These agricultural
research “spillovers” are typically
higher for livestock-related research than they
are for crop research. And while fewer studies are
available on the benefits of private sector research,
it appears that here, too, society as a whole benefits.
Important gaps in our knowledge
of research returns still exist. Notably, there
has been limited empirical work assessing returns
to agricultural research on nonmarket objectives
such as natural resource quality, food safety, economics,
and policy. Since the private sector is unlikely
to invest in much research in these areas, they
are major goals for public agricultural research.
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