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Returns on investment in agricultural R&D
Investment in agricultural research is characterised by consistently high returns. Alston et al.
(2000) compiled 289 studies of returns to agricultural research and development and, based
on the resulting 1,821 estimates of rates of return, calculated the overall average annual rates
of return to be 65%. Based on these high returns, the authors concluded that there has been
significant underinvestment in agricultural research.
According to the World Development Report 2008, investment in agriculture research has "paid
off handsomely", delivering an average internal rate of return of 43% in 700 development projects
evaluated in developing countries.
In an analysis of Australian case studies, Mullen (2007) concluded that returns to agricultural
research have been between 15 and 40%. Importantly, Mullen (2007) found no evidence of
a decline in rates of return to agricultural investment over time, supporting Alston et al.'s
observations about underinvestment.
Recently Harding et al. (2009) undertook a meta-analysis of 37 quantitative impact assessments
of Australian Government investment in international agricultural research. They too identified
high returns (average benefit:cost ratio of 54) and found evidence that returns have been
increasing over time.
Alston (2002) highlighted the profound implications of spillovers from public agricultural
R&D and proposed that half of productivity gains in a state or nation may arise from research
conducted elsewhere. Spillovers also have major implications for the manner in which research
benefits are distributed between countries, as well as between producers and consumers.
Research generates benefits that flow regionally, nationally and internationally. The inability
of a party to capture or control the flow of benefits for themselves---or 'spillovers' (the extent to
which one party benefits from the stock of R&D of another party)---leads to underinvestment
by the private sector. In developed countries institutional mechanisms, such as intellectual
property (IP) rights, tax incentives and government-industry research collaboration, such as
cooperative research centres, are employed to address this private sector underinvestment. Recent
analyses call into question the extent to which private sector investment has grown under these
mechanisms (Pardey pers comm.). However, the legal and institutional frameworks in developing
countries are such that public investment will remain essential for the foreseeable future.
Alston (2002) Spillovers. Aust J Agric and Res Econ 46(3):315-46.
Alston JM, Marra MC, Pardey PG and Wyatt TJ (2000) Research returns redux: a meta-analysis of the returns to
agricultural R&D. Aust J Agric and Res Econ 44(2):185-215.
Harding M, Jiang T and Pearce D (2009) Analysis of ACIAR's returns to investment: appropriateness, efficiency and
effectiveness. Centre for International Economics. ACIAR Impact Assessment Series Report No. 63. ACIAR,
Mullen, JD and Crean, J (2007) Productivity Growth in Australian Agriculture: Trends, Sources and Performance, The
Australian Farm Institute, March 2007
intellectual capital, that is, the knowledge R&D
creates, towards the unique dynamics and
challenges presented by such environments.
Research will be needed not only into
technological solutions but into human and
environmental dimensions: value chains,
markets, gender, equity, health, nutrition and
Australia has been a world leader in
agricultural research for many years. The
benefits flowing from this research have
applications beyond our shores. Australia shares
the range of agricultural environments---and
problems---with many areas in Asia, the Pacific
ACIAR enhances spillovers between
Australian and developing country research
by brokering research partnerships across
the spectrum of public and private spheres,
providing intellectual capital to agricultural
researchers in developing countries.
In East Timor, for example, a survey of
subsistence farmers by researchers working as
part of Australia's aid program found that no
family among those surveyed had sufficient
food staples of rice or maize to last a full year.
Seven out of 10 families went without
maize for 4 or more months each year. All
families surveyed were forced to ration food for
1--6 months each year. Many families reported
that they gathered wild food regularly, with
the worst affected consuming seed needed for
planting crops the following season.
Australia is helping to reverse this situation
by introducing crop varieties that are better
suited to local growing conditions and which
yield higher than the varieties currently grown.
Working with the centres of the Consultative
Group on International Agricultural Research
(CGIAR), the Australian aid program, through
ACIAR, sourced a number of staple crop
varieties suited to the agroecological conditions
in East Timor.
Since research began in 2005, 114 of East
Timor's 442 villages have seen improvements in
food security as a result of seed dissemination
and field trials funded by Australia.
Interviews with farmers participating in the
project found that more than half had sold,
on average, one-third of their increased crop
production and used the extra income to buy rice,
protein and other produce to enrich the family diet.
ACIAR's role in East Timor is small but
important. We have designed projects that take
public-good assets, in the form of CGIAR-held
seed, and delivered these into farming areas in
the country, testing varieties to determine the
At the same time we are helping rebuild
the research capacity of both government
and academic sectors, engaging with the
public sector in East Timor to ensure it has
the infrastructure and capacity to deliver on
publicly funded R&D in the future.
Of course this is different to much of the
research undertaken in China, for example,
where recent work relates to WTO accession
and equalising the flow of benefits from
trade across the country. This reflects the
differences between the agricultural and policy
environments in the two countries.
Were ACIAR to reverse these approaches
taken in East Timor and China, neither program
would have much success.
The steps to the next series of mini
green revolutions---be they in Asia, Africa
or elsewhere---will begin with targeted
approaches to the unique needs of individual
countries and localities. Investment in
agricultural research will inform, and should
flow from, that understanding.
Agricultural R&D can be a powerful
driver of development and provider of
food security. Ensuring R&D continues to
deliver on this promise begins with an
understanding that the way ahead is not
the broad avenue travelled by the Green
Revolution, but rather a series of winding
pathways, each with its own challenges and
unique solutions. n
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