Levy-funded research choices by producers and society
Commodity levies are used increasingly to fund producer collective goods such as research and promotion. In the present paper we examine theoretical relationships between producer and national benefits from levy‐funded research, and consider the implications for the appropriate rates of matching government grants, applied with a view to achieving a closer match between producer and national interests. In many cases the producer and national optima coincide. First, regardless of the form of the supply shift, when product demand is perfectly elastic, or all the product is exported, domestic benefits and costs of levy‐funded research all go to producers and they have appropriate incentives. Second, if research causes a parallel supply shift, the producer share of research benefits is the same as their share of costs of a levy, and their incentives are compatible with national interests. In such cases, a matching grant would cause an over‐investment in research from a national perspective. However, if demand is less than perfectly elastic, and research causes a pivotal supply shift, the producer share of benefits is smaller than their share of costs of the levy, and they will under‐invest in research from a national point of view. A matching grant can be justified in such cases, however the magnitude of the optimal grant is sensitive to market conditions.
Volume (Year): 48 (2004)
Issue (Month): 1 (March)
|Contact details of provider:|| Postal: AARES Central Office Manager, Crawford School of Public Policy, ANU, Canberra ACT 0200|
Phone: 0409 032 338
Web page: http://www.aares.info
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Xueyan Zhao & John Mullen & Garry Griffith & Roley Piggott & William Griffiths, 2003. "The incidence of gains and taxes associated with R&D and promotion in the Australian beef industry," Agribusiness, John Wiley & Sons, Ltd., vol. 19(3), pages 333-344.
- Xueyan Zhao, 2002.
"Who Bears the Burden and Who Receives the Gain? - The Case of GWRDC R&D Investments in the Australian Grape and Wine Industry,"
Monash Econometrics and Business Statistics Working Papers
15/02, Monash University, Department of Econometrics and Business Statistics.
- Xueyan Zhao, 2003. "Who bears the burden and who receives the gain?-The case of GWRDC R&D investments in the Australian grape and wine industry," Agribusiness, John Wiley & Sons, Ltd., vol. 19(3), pages 355-366.
- James F. Oehmke & Eric W. Crawford, 2002. "The Sensitivity of Returns to Research Calculations to Supply Elasticity," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 84(2), pages 366-369.
- Duncan, R & Tisdell, Clem, 1971. "Research and Technical Progress: The Returns to Producers," The Economic Record, The Economic Society of Australia, vol. 47(117), pages 124-129, March.
- Campbell, H F & Bond, K A, 1997. "The Cost of Public Funds in Australia," The Economic Record, The Economic Society of Australia, vol. 73(220), pages 22-34, March.
- Moschini, GianCarlo & Lapan, Harvey E., 1997.
"Intellectual Property Rights and the Welfare Effects of Agricultural R & D,"
Staff General Research Papers Archive
5048, Iowa State University, Department of Economics.
- Giancarlo Moschini & Harvey Lapan, 1997. "Intellectual Property Rights and the Welfare Effects of Agricultural R&D," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(4), pages 1229-1242.
- Moschini, GianCarlo & Lapan, Harvey E., 1999. "Intellectual Property Rights and the Welfare Effects of Agricultural R&D," Staff General Research Papers Archive 1735, Iowa State University, Department of Economics.
- Martin, Will & Alston, Julian M, 1997. "Producer Surplus without Apology? Evaluating Investments in R&D," The Economic Record, The Economic Society of Australia, vol. 73(221), pages 146-158, June.
When requesting a correction, please mention this item's handle: RePEc:ags:aareaj:117861. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (AgEcon Search)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.