Q. How does agricultural research and development
affect agricultural productivity?
A. Most studies have been consistent
in finding high rates of return (40 to 60 percent) for
public investment
in agricultural research and development (R&D). These
rates emerge regardless of the level of aggregation (individual
commodities or more aggregate measures) or geographical
area considered. Some evidence suggests a higher rate
of return to science-oriented (basic) R&D than to applied
R&D.
The rate of return to public agricultural R&D is higher than the
rates of return to other investments affecting agricultural productivity,
such as public extension, private R&D, and farmers' education. More
studies on the rates of return to different public investments are
needed to assist public decisionmakers in intelligently allocating
the limited funds.
In a recent study, Yee,
et al. (2002) used data for 1960-1993 to explain agricultural
productivity growth at the state level with public R&D, R&D
spillovers, extension, transportation infrastructure, and weather
variables as factors. They found public agricultural R&D and
highways had positive impacts on agricultural productivity, and
the marginal real social rate of return to public agricultural R&D
was large. R&D spillovers due to R&D conducted in neighboring
states was found to impact agricultural productivity positively
in all regions, and the computed real rate of return to investments
in public agricultural R&D to any one state was less than the
social rate of return to all states in its region.
In another recent study, Ahearn,
et al. (2002) employed a simultaneous equations model with equations
for productivity, farm size measured as land rent per farm, and
the odds that an operator works off-farm at least 200 days per year.
The basic conceptual model for the productivity equation was identical
to that found in Yee,
et al. (2002), with the addition of agricultural structure variables.
Public investments in R&D, extension, and highways all had positive
impacts on productivity. Two of their structure variables, the use
of production contracting and specialization, had a positive effect
on productivity.
For a study of the relationship between productivity and research,
see U.S. Agricultural Growth and
Productivity: An Economywide Perspective. An international
perspective on rates of return is available from the Food and
Agriculture Organization.
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