The Economics of Agricultural R&D

Agricultural research has transformed agriculture and in doing so contributed to the transformation of economies. Economic issues arise because agricultural research is subject to various market fail­ ures, because the resulting innovations and technological changes have important economic consequences for net income and its distri­ bution, and because the consequences are difficult to discern and attribute. Economists have developed models and measures of the economic consequences of agricultural R&D and related policies in contributions that relate to a very broad literature ranging across production economics, development economics, industrial organiza­ tion, economic history, welfare economics, political economy, econo­ metrics, and so on. A key general finding is that the social rate of return to investments in agricultural R&D has been generally high. Specific findings differ depending on methods and modeling assump­ tions, particularly assumptions concerning the research lag distribu­ tion, the nature of the research-induced technological change, and the nature of the markets for the affected commodities.