SUPPLY AND DEMAND FUNCTIONS FOR UK AGRICULTURE: BIASES OF TECHNICAL CHANGE AND THE RETURNS TO PUBLIC R&D

Yougesh Khatri and Colin Thirtle

Journal of Agricultural Economics, 1996, vol. 47, issue 1‐4, 338-354

Abstract: This study is the first UK application of the integrated, single‐stage approach to estimating the returns to R&D. Fitting a residual profit function, which incorporates the technology variables, to new data for UK agriculture for 1954–1990 produces short‐ and long‐run estimates of the output supply and input‐demand price elasticities, elasticities of the effects of relaxing the non‐variable input constraints and shadow prices for these non‐variable factors. All of the supply and demand relationships are found to be inelastic, but the price‐responsiveness of the system has increased over time. The long‐run model, in which all of the inputs except land are treated as variable and private‐sector research is included, gives a marginal rate of return to public agricultural R&D of only 18 per cent. Estimates of the factor‐saving biases of the technology variables suggest that public R&D has had its greatest effect in the animal sector.

Date: 1996
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