Private R&D Investments in Agriculture: The Role of Incentives and Institutions

Oscar Alfranca and Wallace Huffman

ISU General Staff Papers from Iowa State University, Department of Economics

Abstract: This paper presents econometric evidence of the effects of economic incentives and institutions on national aggregate private agricultural R&D investments. Amodel is proposed and fitted to annual data for seven European Union countries, 1984-1995. We find strong impacts ofboth incentives and mstitutions on private agricultural R&D investment, and including institutional factors strengthens the story and in some case changes greatly the results. In particular, we reject the hypothesis that quality ofproperty rights does not matter. We find that stronger contract enforcement, more efficient public bureaucracies, and stronger patent rights lead to larger aggregate private agricultural R&D investment, other things equal. Furthermore, we show that the impact ofacountry's patent rights on private agricultural R&D investment is amplified by it also having amore efficient public bureaucracy and alarger stock of agricultural higher education capital. We also find evidence ofpublic R&D crowding-out private agricultural R&D, which does support recent privatization policies. Inter-country private R&D spillins increase national agricultural R&D investment.

Date: 1999-12-01
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Working Paper: Private R & D Investments in Agriculture: The Role of Incentives and Institutions (2001)
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