Agricultural R&D, Technological Agricultural R&D, - - PowerPoint PPT Presentation

Agricultural R&D, Technological Change, and Food Security Agricultural R&D, Technological Change, and Food Security Julian M. Alston

Department of Agricultural and Resource Economics University of California, Davis

Julian M. Alston

Department of Agricultural and Resource Economics University of California, Davis

Effects of Agricultural R&D Effects of Agricultural R&D

For sure

• more abundant, cheaper food
• less poverty
• a decrease in the number of people going hungry
• a (perhaps smaller) decrease in the proportion of people going

hungry And perhaps

• more specialized and more intensive production on individual

farms (and, for some, a greater risk of crop failure)

• a greater use of purchased inputs (and, for some, a greater risk
• f financial ruin)
• a faster rate of consumption of natural resource stocks
• less biological diversity and an increased risk of widespread

famine

Annual Growth in Agricultural Production, 1961-1997 Annual Growth in Agricultural Production, 1961-1997

Crop Livestock Total (percentage) Latin America and the Caribbean 2.61 2.85 2.71 Asia 3.01 4.93 3.50 Sub-Saharan Africa 2.09 2.35 2.16 Developing Countries 2.97 4.07 3.29 United States 1.98 1.23 1.61 Western Europe 1.08 1.43 1.27 Developed Countries 1.20 1.33 1.27 World 2.23 2.28 2.25

Agricultural Productivity Growth in South China, 1976-1995 Agricultural Productivity Growth in South China, 1976-1995

Crop Total MFP Growth MFP Growth Due to R&D (percent per annum) Rice 1.78 1.38 Wheat 4.54 2.82 Other Grain 4.29 3.58 Cash Crops 9.27 7.26

U.S. Wheat and Rice Yields, 1800-1996 U.S. Wheat and Rice Yields, 1800-1996

1000 2000 3000 4000 5000 6000 7000 1800 1869 1874 1879 1884 1889 1894 1899 1904 1909 1914 1919 1924 1929 1934 1939 1944 1949 1954 1959 1964 1969 1974 1979 1984 1989 1994 pounds per acre

Wheat Rice

Morill Land Grant College Act 1862 1887 Hatch Experimental Station Act 1914 Smith-Lever Act 1925 Purnell Act 1935 Bankhead- Jones 1955 Revised Hatch

World Wheat Yields, 1960-1996 World Wheat Yields, 1960-1996

0.00 0.50 1.00 1.50 2.00 2.50 3.00 1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 Year Yield (metric tons per hectare)

World Wheat Production, 1960-1996 World Wheat Production, 1960-1996

100,000 200,000 300,000 400,000 500,000 600,000 700,000 1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 Year Thousand Metric Tons

U.S. Real Wheat and Rice Prices, 1899-1996 (1994 US$) U.S. Real Wheat and Rice Prices, 1899-1996 (1994 US$)

10 20 30 40 50 60 1866 1871 1876 1881 1887 1892 1897 1902 1907 1912 1917 1922 1927 1932 1937 1942 1947 1952 1957 1962 1967 1972 1977 1982 1987 1992 1994 dollars per 100 lb Wheat Rice

Real World Food Price Index, 1959=100 Real World Food Price Index, 1959=100

20 40 60 80 100 120 140 160 180 200 1959 1961 1963 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997

World Food Price and per Capita Food Production World Food Price and per Capita Food Production

20 40 60 80 100 120 140 160 180 200 1959 1961 1963 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 Index (1961=100) Food Price Food/capita

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Past Patterns--over 35 years

• q = dlnQ = 100%
• p = dlnP = -50 %
• g = q - ε p = 150 % (ε = 1)

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Assume η = - 0.2 and 2/3g = 100 % increase in supply due to research, relative to 1960

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Eliminate past growth in supply from R&D (reduce supply by 50 % relative to 1995)

• q = -η(-50%)/(ε-η) = -8% (-16% of 1960)
• p = -(-50%)/(ε-η) = 42% (25% of 1960)

Effects of Eliminating Past R&D on Current Grain Production and Prices Effects of Eliminating Past R&D on Current Grain Production and Prices

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Bi = -PiCi dlnPi + (ki + dlnPi)PiQi > 0?

• consumers: -PiCi dlnPi > 0
• producers: (ki + dlnPi)PiQ > 0?

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Bi = ki PiQi + (PiQi – PiCi) dlnPi > 0?

• adopters: ki PiQi > 0
• deficit households: (PiQi – PiCi) dlnPi > 0
• surplus households: (PiQi – PiCi) dlnPi < 0

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Households who produce a surplus and cannot adopt are the only sure losers

Distributional Considerations Distributional Considerations

Agricultural R&D and Household Income Distributions Agricultural R&D and Household Income Distributions

frequency poverty line (b) (a) 0 (b) (a) annual income

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world population will increase by 32% to 7.5 billion, mostly in cities in developing countries

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per capita incomes will increase in all regions

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85% of total food demand growth will come from developing countries

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demand for meat (and for grain for feeding livestock) in developing world will double

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world grain production will have to increase 40 percent (through yield improvement)

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food prices will remain steady or fall slightly

IFPRI Projections: 1995-2020 IFPRI Projections: 1995-2020

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Global public ag. R&D increased from $7.3 billion to $15 billion

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In developing countries: from $3 billion to $8 billion

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In developed countries: from $4.3 billion to $7 billion

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ARIs in developed countries increased from $1.38 to $2.39 per $100 of output

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ARIs in developing countries increased from $0.38 to $0.50 per $100 of output

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Slower growth in the 1980s than the 1970s

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Spending in IARCs grew rapidly in the 1970s, stalled in the 1990s

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Relatively rapid growth of private agricultural research, in developed countries, in particular areas

Agricultural Research Investments: 1971 to 1991 Agricultural Research Investments: 1971 to 1991

Public Agricultural R&D Spending: Global Perspectives, 1971 and 1991 Public Agricultural R&D Spending: Global Perspectives, 1971 and 1991

1991: 14.95 billion 1985 international dollars

Australia, Netherlands, New Zealand, United Kingdom, & USA Other developed countries Developing countries

1971: 7.28 billion 1985 international dollars

32% 27% 41% 26% 20% 54%

Public vs. Private R&D in OECD Countries (1981-93 growth rates) Public vs. Private R&D in OECD Countries (1981-93 growth rates)

• 3

.

• 2

.

• 1

. . 1 . 2 . 3 . 4 . 5 . 6 . 7 . 8 .

• 2.0

0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0

Greece New Zealand Belgium Ireland Canada United Kingdom Australia Germany Austria France Netherlands

Average

Switzerland Japan United States Sweden Denmark Finland Norway Italy Portugal Spain Iceland Greece Belgium Ireland United Kingdom New Zealand Canada Australia Germany Austria France Netherlands

Average

Switzerland Japan United States Sweden Denmark Finland Norway Italy Portugal Spain Iceland Continues to 32.0

Public Private

1.8% pa 5.0% pa

Policy Issues Policy Issues

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How much total R&D?

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Which types of R&D?

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Who should pay for it?

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Who should do it?

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What institutional arrangements?

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What incentive mechanisms?

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How much total R&D?

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Which types of R&D?

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Who should pay for it?

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Who should do it?

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What institutional arrangements?

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What incentive mechanisms?

A Supply and Demand Model A Supply and Demand Model

$ MSC = MPC MSB

+

MPB MSB 0 R0 R R1 R2 Research (R)

Food Security FS2 FS1 FS FS0 0 R0 R R1 R2 Research (R)

A Trade-off of Equity and Efficiency Using Research Policy Alone A Trade-off of Equity and Efficiency Using Research Policy Alone

Equity (V) VMAX a b V* IC0 BTCR c VMIN 0 E* EMAX Efficiency (E)

A Trade-off of Equity and Efficiency Using the Least-Cost Policy Combination A Trade-off of Equity and Efficiency Using the Least-Cost Policy Combination

Equity (V) BTC* V** d BTCR IC1 V* b IC0 VMIN c e. 0 E* E** EMAX Efficiency (E)

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Will “targeted” research be effective?

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Will it yield smaller total benefits?

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Will it yield greater food security (or other distributional) benefits?

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Is “targeted” research the least-cost way of achieving the food security (or other distributional) objective?

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Need a better understanding of technological possibilities and consequences for different types if research

Targeted versus Traditional Research Targeted versus Traditional Research

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Agricultural R&D has increased total availability of food, and enhanced access by the poor

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Important effects: Without past 35 years of growth in grain supply from R&D quantity would be 8% lower, price 42 % higher

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Projections imply grain yields “have to” increase 40 % by 2020 through productivity increases

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Funds for public R&D

• Is the current rate of investment adequate?
• Will “targeted” R&D be effective?
• Is it the best instrument for distributional objectives?

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Information is lacking on implications of targeting for

• Total benefits
• Distributional outcomes

Conclusion: Main Points Conclusion: Main Points