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Short and long-run returns to agricultural R&D in South Africa, or will the real rate of return please stand up?

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  • Schimmelpfennig, David
  • Thirtle, Colin
  • van Zyl, Johan
  • Arnade, Carlos
  • Khatri, Yougesh

Abstract

This paper briefly presents the results of a total factor productivity (TFP) study of South African commercial agriculture, for 1947-1997, and illustrates some potential pitfalls in rate of return to research (ROR) calculations. The lag between R&D and TFP is analyzed and found to be only 9 years, with a pronounced negative skew, reflecting the adaptive focus of the South African system. The two-stage approach gives a massive ROR of 170%. The predetermined lag parameters are then used in modeling the knowledge stock, to refine the estimates of the ROR from short- and long-run dual profit functions. In the short run, with the capital inputs treated as fixed, the ROR is a more reasonable 44%. In the long run, with adjustment of the capital stocks, it rises to 113%, which would reflect the fact that new technology is embodied in the capital items. However, the long-run model raises a new problem since capital stock adjustment takes 11 years, 2 years longer than the lag between R&D and TFP. If this is assumed to be the correct lag, the ROR falls to 58%, a best estimate. The paper draws attention to the possible sensitivity of rate of return calculations to assumed lag structure, particularly when the lag between changes in R&D and TFP is skewed. © 2000 Elsevier Science B. V. All rights reserved.
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  • Schimmelpfennig, David & Thirtle, Colin & van Zyl, Johan & Arnade, Carlos & Khatri, Yougesh, 2000. "Short and long-run returns to agricultural R&D in South Africa, or will the real rate of return please stand up?," Agricultural Economics, Blackwell, vol. 23(1), pages 1-15, June.
  • Handle: RePEc:eee:agecon:v:23:y:2000:i:1:p:1-15
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    Cited by:

    1. 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.
    2. Roberto Esposti & Pierpaolo Pierani, 2003. "Building the Knowledge Stock: Lags, Depreciation, and Uncertainty in R&D Investment and Link with Productivity Growth," Journal of Productivity Analysis, Springer, vol. 19(1), pages 33-58, January.
    3. Nasir nadeem, Dr. & khalid Mushtaq, Dr., 2010. "Role of Agricultural Research and Extension in Enhancing Agricultural Productivity in Punjab, Pakistan," MPRA Paper 27769, University Library of Munich, Germany.
    4. Fernandez-Cornejo, Jorge, 2004. "The Seed Industry In U.S. Agriculture: An Exploration Of Data And Information On Crop Seed Markets, Regulation, Industry Structure, And Research And Development," Agricultural Information Bulletins 33671, United States Department of Agriculture, Economic Research Service.
    5. Arega D. Alene, 2010. "Productivity growth and the effects of R&D in African agriculture," Agricultural Economics, International Association of Agricultural Economists, vol. 41(3-4), pages 223-238, May.
    6. Liebenberg, Frikkie & Pardey, Philip G., 2012. "A long-run view of South African agricultural production and productivity," African Journal of Agricultural and Resource Economics, African Association of Agricultural Economists, vol. 7(1), October.
    7. Goldsmith, Peter D. & Gunjal, Kisan & Ndarishikanye, Barnabe, 2004. "Rural-urban migration and agricultural productivity: the case of Senegal," Agricultural Economics, Blackwell, vol. 31(1), pages 33-45, July.
    8. Esposti, Roberto & Pierani, Pierpaolo, 2002. "Public R&D Investment and Cost Behaviour in Italian Agriculture: 1960-1995," 2002 International Congress, August 28-31, 2002, Zaragoza, Spain 24974, European Association of Agricultural Economists.
    9. Fuglie, Keith, 0. "Accounting for growth in global agriculture," Bio-based and Applied Economics Journal, Italian Association of Agricultural and Applied Economics (AIEAA), issue 3.
    10. Esposti, Roberto & Pierani, Pierpaolo, 2003. "Public R&D Investment From Private And Social Perspective. An Application To Italian Agriculture, 1960-1995," 2003 Annual Meeting, August 16-22, 2003, Durban, South Africa 25876, International Association of Agricultural Economists.

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