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Modelling Agricultural Public R&D Cofinancing Within A Principal-Agent Framework. The case of an Italian region

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  • Valentina Cristiana MATERIA

    ()
    (Universita' Politecnica delle Marche, Dipartimento di Economia)

  • Roberto ESPOSTI

    ()
    (Universita' Politecnica delle Marche, Dipartimento di Economia)

Abstract

This paper analyses how a public institution chooses the optimal contract (cofinancing rate) in funding agricultural R&D research projects. A theoretical model is developed within a principal-agent framework taking into account the asymmetric information both players have to handle. The researcher (the agent) initially does not know the cofinancing granted by the funding institution (the principal). This latter, in turn, only observes some objective features of the researchers and of the selected research projects and, ex post, the research outcome, but not the agent's actual effort on the project. The principal uses the available information to offer the cofinancing rate (the contract) that, under specific contractual clauses, induces the agent's effort that maximizes principal's utility. The model eventually assumes the form of a Stackelberg-type game. An empirically testable relation is also derived from the theoretical model and is then applied to the agricultural R&D programme funded by the Italian region Emilia-Romagna over years 2001-2006.

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Bibliographic Info

Paper provided by Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali in its series Working Papers with number 347.

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Length: 38
Date of creation: Sep 2010
Date of revision:
Handle: RePEc:anc:wpaper:347

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Related research

Keywords: Censored-Normal Regression; Principal-Agent Problem; Public R&D Funding; Stackelberg-type game;

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  1. Huffman, Wallace & Norton, G. & Traxler, G. & Frisvold, G. & Foltz, J., 2007. "Winners and Losers: Formula Versus Competitive Funding of Agricultural Research," Staff General Research Papers 12783, Iowa State University, Department of Economics.
  2. Townsend, Robert & Thirtle, Colin, 2001. "Is livestock research unproductive?: Separating health maintenance from improvement research," Agricultural Economics, Blackwell, vol. 25(2-3), pages 177-189, September.
  3. Robert Gibbons, 1998. "Incentives in Organizations," Journal of Economic Perspectives, American Economic Association, vol. 12(4), pages 115-132, Fall.
  4. Spielman, David J. & von Grebmer, Klaus, 2004. "Public-private partnerships in agricultural research: an analysis of challenges facing industry and the Consultative Group on International Agricultural Research," EPTD discussion papers 113, International Food Policy Research Institute (IFPRI).
  5. Holmström, Bengt, 1989. "Agency Costs and Innovation," Working Paper Series 214, Research Institute of Industrial Economics.
  6. Roberto Esposti & Pierpaolo Pierani, 2006. "Price, private demand and optimal provision of public R&D investment: An application to Italian agriculture, 1960–1995," Empirical Economics, Springer, vol. 31(3), pages 699-715, September.
  7. Huffman, Wallace & Just, Richard E., 1999. "The Organization of Agricultural Research in Western Developed Countries," Staff General Research Papers 1649, Iowa State University, Department of Economics.
  8. Norbäck, Pehr-Johan & Persson, Lars, 2006. "The Organization of the Innovation Industry: Entrepreneurs, Venture Capitalists and Oligopolists," CEPR Discussion Papers 5449, C.E.P.R. Discussion Papers.
  9. Wallace E. Huffman & Richard E. Just, 2000. "Setting Efficient Incentives for Agricultural Research: Lessons from Principal-Agent Theory," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 82(4), pages 828-841.
  10. Holmstrom, Bengt, 1989. "Agency costs and innovation," Journal of Economic Behavior & Organization, Elsevier, vol. 12(3), pages 305-327, December.
  11. Roberto Esposti, 2003. "Public R&D investment and cost structure in Italian agriculture, 1960--1995," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 30(4), pages 509-537, December.
  12. McDonald, John, 2009. "Using least squares and tobit in second stage DEA efficiency analyses," European Journal of Operational Research, Elsevier, vol. 197(2), pages 792-798, September.
  13. Pardey, Philip G. & Beintema, Nienke M., 2002. "Slow Magic: Agricultural R&D A Century After Mendel," Working Papers 14364, University of Minnesota, Center for International Food and Agricultural Policy.
  14. Huffman, Wallace & Just, Richard E., 1999. "Agricultural Research: Benefits and Beneficiaries of Alternative Funding Mechanisms," Staff General Research Papers 1557, Iowa State University, Department of Economics.
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Cited by:
  1. Giovanni Cerulli, 2010. "Are R&D subsidies provided optimally? Evidence from a simulated agency-firm stochastic dynamic game," CERIS Working Paper 201011, Institute for Economic Research on Firms and Growth - Moncalieri (TO).
  2. Elena AMBROSETTI & Eralba CELA & Tineke FOKKEMA, 2011. "The Remittances Behaviour of the Second Generation in Europe: Altruism or Self-Interest?," Working Papers 368, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
  3. Materia, Valentina Cristiana, 2012. "The Agricultural Knowledge and Innovation System in Italy: dynamics, incentives, monitoring and evaluation experiences," Studies in Agricultural Economics, Research Institute for Agricultural Economics, vol. 114(2), October.
  4. Alberto Russo, 2014. "A Stochastic Model of Wealth Accumulation with Class Division," Metroeconomica, Wiley Blackwell, vol. 65(1), pages 1-35, 02.
  5. Eralba CELA & Tineke FOKKEMA & Elena AMBROSETTI, 2012. "Links Between Transnationalism Integration and Duration of Residence: The Case of eastern European Migrants in Italy," Working Papers 386, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
  6. Alessandro STERLACCHINI, 2012. "Patent Oppositions as Competitive Tools: An Analysis of the Major Players in the European Market of White Goods," Working Papers 374, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
  7. Simone LENZU & Gabriele TEDESCHI, 2012. "Systemic risk on different interbank network topologies," Working Papers 375, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
  8. Ruggero GRILLI & Gabriele TEDESCHI & Mauro GALLEGATI, 2012. "Markets connectivity and financial contagion," Working Papers 382, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
  9. Luca RICCETTI, 2011. "A Copula-GARCH Model for Macro Asset Allocation of a Portfolio with Commodities: an Out-of-Sample Analysis," Working Papers 355, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.

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