Rates of Return to Agricultural Research and Extension in the Southern Region

Abstract

The interregional transfer of agricultural research results has long been recognized by sociologists and economists [10, pp. 524–526]. The first major economic study in this area was reported in 1957 by Griliches [7]. However, many economists have failed to account for this type of transfer in estimating rates of return for agricultural research investment at the state level. A possible explanation for the failure to account for this transfer is that many analyses at the state level are modeled after national studies. Though researchers estimating a national rate of return may not feel a need to account for interregional transfers, these transfers clearly cannot be ignored at the state or regional levels. Latimer and Paarlberg [9] and Bauer and Hancock [2] estimated aggregate production functions for states and had difficulty finding a statistically significant relationship between research expenditures within the state and agricultural output. Bauer and Hancock finally estimated a lagged relationship that is in conflict with other conceptual and empirical models. Latimer and Paarlberg concluded that research is so pervasive that there are no measurable differences in levels of farm income attributable to differences in research inputs by states [9, p. 239]. More recently, Bredahl and Peterson [3] examined the differences in rates of return to cash crops, dairy, poultry, and livestock research among states. These estimates are appropriate if agricultural research results are limited by state boundaries. The interregional transfer of agricultural research results needs to be taken into account in estimating the returns to agricultural research at a regional level.