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

  • Valentina Cristiana MATERIA

    ()

    (Universita' Politecnica delle Marche, Dipartimento di Economia)

  • Roberto ESPOSTI

    ()

    (Universita' Politecnica delle Marche, Dipartimento di Economia)

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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File URL: http://docs.dises.univpm.it/web/quaderni/pdf/347.pdf
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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
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Handle: RePEc:anc:wpaper:347
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  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. 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.
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  5. Huffman, Wallace E. & Norton, George W. & Traxler, Greg & Frisvold, George B. & Foltz, Jeremy D., 2006. "Winners and Losers: Formula versus Competitive Funding of Agricultural Research," Choices, Agricultural and Applied Economics Association, vol. 21(4).
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  7. 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.
  8. 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).
  9. Huffman, Wallace & Just, Richard E., 1998. "Setting Efficient Incentives for Agricultural Research: Lessons from Principal-Agent Theory," Staff General Research Papers 1389, Iowa State University, Department of Economics.
  10. 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.
  11. 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.
  12. Holmstrom, Bengt, 1989. "Agency costs and innovation," Journal of Economic Behavior & Organization, Elsevier, vol. 12(3), pages 305-327, December.
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  14. 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.
  15. Townsend, Robert & Thirtle, Colin, 2001. "Is livestock research unproductive? Separating health maintenance from improvement research," Agricultural Economics of Agricultural Economists, International Association of Agricultural Economists, vol. 25(2-3), September.
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