Public investment in agricultural research and development in Australia remains a sensible policy option
There is evidence that productivity in Australiaâ€™s broadacre agriculture (extensive cropping and livestock industries) has been slowing in the past decade. A series of poor seasons has been partly responsible, but an econometric analysis of structural changes in the trend of total factor productivity (TFP) indicates that stagnant public investment in agricultural R&D has also made a significant contribution to this slowdown in TFP. Related econometric analysis of the returns to public investment in agricultural R&D in the broadacre sector confirms that the rate of return to investment remains high. Despite these findings, a recent enquiry by Australiaâ€™s Productivity Commission into the financing of rural research suggests that the public sector may be â€˜crowding outâ€™ private sector investment in agricultural R&D and recommends a reduction in public support. In this paper I briefly review the econometric analyses to date and the trends in TFP and public R&D investment. While I have not been able to conclusively test the â€˜crowding outâ€™ hypothesis, there seems to be little empirical evidence to prefer this hypothesis to a more traditional â€˜market failureâ€™ hypothesis. Clearly, stakeholders in agricultural R&D in Australia have to do a better job in communicating the case for public investment in agricultural R&D. Other developed countries are experiencing the same phenomenon and it may become an issue in the future for developing countries in Asia.
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- O'Donnell, Christopher J., 2010.
"Measuring and decomposing agricultural productivity and profitability change,"
Australian Journal of Agricultural and Resource Economics,
Australian Agricultural and Resource Economics Society, vol. 54(4), December.
- Christopher J. O'Donnell, 2010. "Measuring and decomposing agricultural productivity and profitability change ," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 54(4), pages 527-560, October.
- O'Donnell, Christopher J., 2009. "Measuring And Decomposing Agricultural Productivity And Profitability Change," 2009 Conference (53rd), February 11-13, 2009, Cairns, Australia 47625, Australian Agricultural and Resource Economics Society.
- Sheng, Yu & Gray, Emily M. & Mullen, John D., 2011. "Public investment in R&D and extension and productivity in Australian broadacre agriculture," 2011 Conference (55th), February 8-11, 2011, Melbourne, Australia 100712, Australian Agricultural and Resource Economics Society.
- Hughes, Neal & Lawson, Kenton & Davidson, Alistair & Jackson, Tom & Sheng, Yu, 2011. "Productivity pathways: climate-adjusted production frontiers for the Australian broadacre cropping industry," 2011 Conference (55th), February 8-11, 2011, Melbourne, Australia 100563, Australian Agricultural and Resource Economics Society.
- Sheng, Yu & Mullen, John D. & Zhao, Shiji, 2010. "Has growth in productivity in Australian broadacre agriculture slowed?," 2010 Conference (54th), February 10-12, 2010, Adelaide, Australia 59266, Australian Agricultural and Resource Economics Society.
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