Agricultural R&D and Economic Growth
September 1, 1996 - Elias Dinopoulos
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EmailIDWP 60. Agricultural R&D and Economic Growth (767KB PDF) by Elias Dinopoulos. 1996. 25 pp.
EXECUTIVE SUMMARY:
The paper develops a dynamic general-equilibrium model of Schumpeterian growth which is
fueled by industrial and agricultural R&D. The former is private and results in better production
processes, whereas the latter is government-financed (public and applied) R&D and generates
better crop varieties. The arrival of innovations in either sector is stochastic.
The model is used to calculate the steady-state equilibrium and the growth-maximizing mix of
agricultural and industrial R&D investments. It is also used to highlight the properties of social
rates of return (ROR) of R&D which are based on partial-equilibrium calculations. These
measures overestimate the true agricultural social ROR and underestimate the true industrial
social ROR of R&D investments. This systematic bias increases with the size of the R&D project
under evaluation.