Levy-funded research choices by producers and society

Julian Alston, John Freebairn and Jennifer S. James

Australian Journal of Agricultural and Resource Economics, 2004, vol. 48, issue 01, 32

Abstract: Commodity levies are used increasingly to fund producer collective goods such as research and promotion. In the present paper we examine theoretical relationships between producer and national benefits from levy‐funded research, and consider the implications for the appropriate rates of matching government grants, applied with a view to achieving a closer match between producer and national interests. In many cases the producer and national optima coincide. First, regardless of the form of the supply shift, when product demand is perfectly elastic, or all the product is exported, domestic benefits and costs of levy‐funded research all go to producers and they have appropriate incentives. Second, if research causes a parallel supply shift, the producer share of research benefits is the same as their share of costs of a levy, and their incentives are compatible with national interests. In such cases, a matching grant would cause an over‐investment in research from a national perspective. However, if demand is less than perfectly elastic, and research causes a pivotal supply shift, the producer share of benefits is smaller than their share of costs of the levy, and they will under‐invest in research from a national point of view. A matching grant can be justified in such cases, however the magnitude of the optimal grant is sensitive to market conditions.

Keywords: Research; and; Development/Tech; Change/Emerging; Technologies (search for similar items in EconPapers)
Date: 2004
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

Downloads: (external link)
https://ageconsearch.umn.edu/record/117861/files/j ... 04.t01-1-00229.x.pdf (application/pdf)

Related works:
Journal Article: Levy‐funded research choices by producers and society (2004)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ags:aareaj:117861

DOI: 10.22004/ag.econ.117861

Access Statistics for this article

More articles in Australian Journal of Agricultural and Resource Economics from Australian Agricultural and Resource Economics Society Contact information at EDIRC.
Bibliographic data for series maintained by AgEcon Search ().