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Recalibrating the Reported Rates of Return to Food and Agricultural R&D

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  • Rao, Xudong
  • Hurley, Terrance M.
  • Pardey, Philip G.

Abstract

Prices of basic food staples and feed crops have soared in recent years, renewing concerns about the ability of global food supplies to meet the projected growth in aggregate demand. Notwithstanding these concerns, and apparently at odds with a vast body of economic evidence reporting exceptionally high rates of return to investments in agricultural R&D, growth in public R&D spending for food and agriculture has slowed worldwide, especially in rich countries. Left unchecked, the consequent slowdown in agricultural productivity will push many more people into hunger and undercut economic growth, especially in the many economies worldwide still heavily reliant on agriculture. The observed R&D spending behavior is consistent with a determination that the rate of return evidence is implausible. We examine this notion, recalibrate a new, comprehensive compilation of the evidence, and find in favor of a much reduced rate of return to research. Nonetheless, the scaling back of public agricultural R&D spending is not supported from this new economic view of the evidence.

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Bibliographic Info

Paper provided by University of Minnesota, Department of Applied Economics in its series Staff Papers with number 135018.

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Date of creation: Sep 2012
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Handle: RePEc:ags:umaesp:135018

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Keywords: Agricultural and Food Policy; Research and Development/Tech Change/Emerging Technologies;

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References

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  1. James Heckman, 2010. "Contributions of Zvi Griliches," NBER Chapters, in: Contributions in Memory of Zvi Griliches, pages 5-22 National Bureau of Economic Research, Inc.
  2. Alston, Julian M. & Pardey, Philip G. & Ruttan, Vernon W., 2008. "Research Lags Revisited: Concepts and Evidence from U.S. Agriculture," Staff Papers, University of Minnesota, Department of Applied Economics 50091, University of Minnesota, Department of Applied Economics.
  3. Julian M. Alston & Matthew A. Andersen & Jennifer S. James & Philip G. Pardey, 2011. "The Economic Returns to U.S. Public Agricultural Research," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, Agricultural and Applied Economics Association, vol. 93(5), pages 1257-1277.
  4. Jean Fouré & Agnès Bénassy-Quéré & Lionel Fontagné, 2010. "The World Economy in 2050: a Tentative Picture," Working Papers 2010-27, CEPII research center.
  5. Yuri Biondi, 2006. "The double emergence of the Modified Internal Rate of Return: The neglected financial work of Duvillard (1755�-�1832) in a comparative perspective," The European Journal of the History of Economic Thought, Taylor & Francis Journals, vol. 13(3), pages 311-335.
  6. Ivanic, Maros & Martin, Will, 2008. "Implications of higher global food prices for poverty in low-income countries," Policy Research Working Paper Series 4594, The World Bank.
  7. Fuglie, Keith O. & Heisey, Paul W., 2007. "Economic Returns to Public Agricultural Research," Economic Brief 6388, United States Department of Agriculture, Economic Research Service.
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Cited by:
  1. Julian M. Alston & Philip G. Pardey, 2014. "Agriculture in the Global Economy," Journal of Economic Perspectives, American Economic Association, vol. 28(1), pages 121-46, Winter.
  2. Anderson, Kym & Strutt, Anna, 2014. "Impacts of Asia’s Rise on African and Latin American Trade: Projections to 2030," 2014 Conference (58th), February 4-7, 2014, Port Maquarie, Australia 165805, Australian Agricultural and Resource Economics Society.
  3. Kym Anderson & Anna Strutt, 2014. "Food security policy options for China: lessons from other countries," Departmental Working Papers, The Australian National University, Arndt-Corden Department of Economics 2014-11, The Australian National University, Arndt-Corden Department of Economics.

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