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Producer Surplus without Apology? Evaluating Investments in R&D

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  • Martin, Will
  • Alston, Julian M

Abstract

Comparison of producer surplus with definitive measures based on the profit function reveals potential problems with using changes in producer surplus to measure the benefits of some common types of technical change. Some illustrative applications indicate that the conventional producer surplus measures may seriously underestimate the change in profit induced by new technology, depending on the characteristics of the underlying technology which define the nature of the supply function, and the nature of the technical change. The authors provide guidelines for identifying cases where producer surplus will underestimate producer research benefits and suggest alternative measures. Copyright 1997 by The Economic Society of Australia.

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Bibliographic Info

Article provided by The Economic Society of Australia in its journal The Economic Record.

Volume (Year): 73 (1997)
Issue (Month): 221 (June)
Pages: 146-58

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Handle: RePEc:bla:ecorec:v:73:y:1997:i:221:p:146-58

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Cited by:
  1. Philip G. Pardey & Julian M. Alston & Connie Chan-Kang & Eduardo C. Magalh�es & Stephen A. Vosti, 2006. "International and Institutional R&D Spillovers: Attribution of Benefits among Sources for Brazil's New Crop Varieties," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 88(1), pages 104-123.
  2. Martin, Will, 2005. "Outgrowing resource dependence theory and some recent developments," Policy Research Working Paper Series 3482, The World Bank.
  3. Karagiannis, Giannis & Furtan, William Hartley, 2002. "The Effects of Supply Shifts on Producers' Surplus: the Case of Inelastic Linear Supply Curves," Agricultural Economics Review, Greek Association of Agricultural Economists, vol. 3(1), January.
  4. Hill, Debbie J. & O'Donnell, Christopher J. & Piggott, Roley R. & Griffith, Garry R., 2000. "The Dual Approach to Research Evaluation:A Simplified Empirical Illustration," 2000 Conference (44th), January 23-25, 2000, Sydney, Australia 123661, Australian Agricultural and Resource Economics Society.
  5. Hertel, Thomas W. & Martin, Will & Leister, Amanda M., 2010. "Potential implications of a special safeguard mechanism in the WTO : the case of wheat," Policy Research Working Paper Series 5334, The World Bank.
  6. Philip Pardey & Julian Alston & Connie Chan-Kang & Eduardo Magalhães & Stephen Vosti, 2003. "Assessing and Attributing the Benefits from Varietal Improvement Research: Evidence from Embrapa, Brazil," Centre for International Economic Studies Working Papers 2003-06, University of Adelaide, Centre for International Economic Studies.
  7. Templeton, Deborah J. & Griffith, Garry R. & Piggott, Roley R. & O'Donnell, Christopher J., 2004. "Measuring the Impact of Staple Strength-Enhancing Technologies on Australian Wool Producer Profits: A Duality-Based Approach," Working Papers 12922, University of New England, School of Economics.
  8. Hoekman, Bernard & Martin, Will, 2012. "Reducing distortions in international commodity markets : an agenda for multilateral cooperation," Policy Research Working Paper Series 5928, The World Bank.
  9. Gregg Frasco & Chulho Jung, 2001. "When producer surplus underestimates rents," Atlantic Economic Journal, International Atlantic Economic Society, vol. 29(4), pages 393-405, December.
  10. George Verikios, 2006. "Understanding the World Wool Market: Trade, Productivity and Grower Incomes. Part 5: Relative Returns to Australian Wool Producers of On- and Off-Farm Research," Economics Discussion / Working Papers 06-23, The University of Western Australia, Department of Economics.
  11. Dey, Madan Mohan & Kumar, Praduman & Chen, Oai Li & Khan, Md. Akhtaruzzaman & Barik, Nagesh Kumar & Li, Luping & Nissapa, Ayut & Pham, Ngoc Sao, 2013. "Potential impact of genetically improved carp strains in Asia," Food Policy, Elsevier, vol. 43(C), pages 306-320.
  12. Gregg Frasco, 2002. "A comparison of rents and producer surplus when industry input supply functions are interdependent," Atlantic Economic Journal, International Atlantic Economic Society, vol. 30(4), pages 403-413, December.
  13. Alston, Julian M. & Freebairn, John W. & James, Jennifer S., 2004. "Levy-funded research choices by producers and society," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 48(1), March.
  14. Martin, Will, 2000. "Reducing carbon dioxide emissions through joint implementation of projects," Policy Research Working Paper Series 2359, The World Bank.
  15. Strappazzon, Loris & Eigenraam, Mark & Wimalasuriya, Rukman & Stoneham, Gary, 2002. "Estimating Research Benefits When there is Input and Output Substitution: Putting Theory into Practice," 2002 Conference (46th), February 13-15, 2002, Canberra 125167, Australian Agricultural and Resource Economics Society.

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