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 agricultural research on multi-output multi-input profit maximizing decisions of Midwestern farmers. The main hypothesis is that investments in public and private R&D shift outward the supply curves for crop The objective of this paper is to identify the impact of public and private agricultural research on multi-output multi-input profit maximizing decisions of Midwestern farmers. The main hypothesis is that investments in public and private R&D shift outward the supply curves for crop and livestock outputs and, in some cases, reduce the demand for inputs. The study uses state aggregate data for eight Midwestern states over 1960-2004. The own-price elasticities of demand for all inputs are shown to be negative, being larger for agricultural chemicals and energy that for farm capital services, labor and other materials. Additional public agricultural research increases the supply of crop and livestock outputs but biases revenue shares toward crop output. Additional private R&D as in adoption of GM corn varieties shifts outward the supply curves for crops and livestock outputs but biases revenue shares towards crop output. In contrast, an increase in the adoption of GM soybean varieties increases livestock output and deceases crop output. Public agricultural research reduces the demand for capital services and energy and increases the demand for agricultural chemicals, other materials, and labor. An increase in the availability of GM soybean varieties increases the demand for capital services, agricultural chemicals and other materials and has weak negative effects on the demand for labor and energy. GM corn variety adoption reduces the demand for energy but other effects are quite small.and livestock outputs and, in some cases, reduce the demand for inputs. The study uses state;aggregate data for eight Midwestern states over 1960-2004. The own-price elasticities of demand for;all inputs are shown to be negative, being larger for agricultural chemicals and energy that for farm;capital services, labor and other materials. Additional public agricultural research increases the;supply of crop and livestock outputs but biases revenue shares toward crop output. Additional;private R&D as in adoption of GM corn varieties shifts outward the supply curves for crops and;livestock outputs but biases revenue shares towards crop output. In contrast, an increase in the;adoption of GM soybean varieties increases livestock output and deceases crop output. Public;agricultural research reduces the demand for capital services and energy and increases the demand;for agricultural chemicals, other materials, and labor. An increase in the availability of GM soybean;varieties increases the demand for capital services, agricultural chemicals and other materials and;has weak negative effects on the demand for labor and energy. GM corn variety adoption reduces;the demand for energy but other effects are quite small.