The Impact of Public and Private R&D on Farmers' Production Decisions: Econometric Evidence for Midwestern States, 1960-2004
The objective of this paper is to identify the impact of public and private agriculturalresearch on multi-output multi-input profit maximizing decisions of Midwestern farmers. The mainhypothesis is that investments in public and private R&D shift outward the supply curves for cropand livestock outputs and, in some cases, reduce the demand for inputs. The study uses stateaggregate data for eight Midwestern states over 1960-2004. The own-price elasticities of demand forall inputs are shown to be negative, being larger for agricultural chemicals and energy that for farmcapital services, labor and other materials. Additional public agricultural research increases thesupply of crop and livestock outputs but biases revenue shares toward crop output. Additionalprivate R&D as in adoption of GM corn varieties shifts outward the supply curves for crops andlivestock outputs but biases revenue shares towards crop output. In contrast, an increase in theadoption of GM soybean varieties increases livestock output and deceases crop output. Publicagricultural research reduces the demand for capital services and energy and increases the demandfor agricultural chemicals, other materials, and labor. An increase in the availability of GM soybeanvarieties increases the demand for capital services, agricultural chemicals and other materials andhas weak negative effects on the demand for labor and energy. GM corn variety adoption reducesthe demand for energy but other effects are quite small.
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