Publicly‐funded UK agricultural R&D and ‘social’ total factor productivity

Abstract

Most studies concerned with measuring the rate of return to publicly-funded agricultural R&D investment have found high returns, suggesting under-investment, and calls for increased expenditure have been common. However, the evaluation of returns tends to measure the effect of research expenditure against growth in total factor productivity (TFP), based on market inputs and outputs. When compared against growing public unease over the environmental effects of pursuing agricultural productivity growth, TFP indices become a misleading measure of growth. This paper integrates some non-market components into the TFP index. The costs of two specific externalities of agricultural production, namely fertiliser and pesticide pollution, are integrated in a TFP index constructed for the period 1948-1995. This adjusted, or 'social', TFP index is measured against UK public R&D expenditures.The rates of return to agricultural R&D are reduced by using the 'social' as opposed to the traditional TFP index. Whilst both remain at justifiable levels, previous studies appear to have over-estimated the effect of agricultural R&D expenditures. Furthermore, with changes in policy towards more socially acceptable but non-productivity enhancing outcomes, such as animal welfare, rural diversification and organic farming, the future framework for analysing returns to agricultural R&D should not be so dependent on productivity growth as an indicator of research effectiveness. 0 2002 Elsevier Science B.V. All rights reserved.Keyw0rd.r UK Productivity; Agricultural R&D; Environmental externalities 0169-5150/02/$ -see front matter 0 2002 Elsevier Science B.V. All rights reserved.PII: S 0 1 6 9 -5 1 5 0 (0 1 ) 00 0 6 1 -5

Crop Level Productivity in the Eastern Counties of England, 1970‐97

“…This is a Laspeyres index of output per unit of all inputs (including fixed capital and labour, but not land) at the sector level. Thirtle and Bottomley (1992) used a Tornqvist-Theil index, which gives very similar results, while Barnes (2002) uses the same technique and extends the analysis to include environmental factors. Measurement of productivity change is not normally conducted at the crop level, due to the absence of crop-specific information in the national agricultural accounts.…”

Explaining the Decline in UK Agricultural Productivity Growth

“…Rayner, Whittaker and Ingersent (1986) put TFP growth at about 1% per annum; Godden (1985) found 1.3% with quality adjustment and 1.5% without; Doyle and Ridout (1985) are at the top end of the scale with an estimate 1.7%, which is the same as the estimate Zanias (1987) made using a production function approach. CSO (1969) 1949-67 1.87% Doyle & Ridout (1985) 1951-81 1.7% Godden (1985) 1964-80 1.5% (1.3% with quality adjustment) Rayner, Whittaker & Ingersent (1986) 1964-79 Laspeyres 1.14% Tornqvist 0.96% Thirtle & Bottomley (1992) 1967-90 1.77% Khatri (1994) 1953-90 1.95% Schimmelpfennig & Thirtle (1999) 1973-93 1.6% Amadi (2000) 1953-95 1.81% Barnes (2002) 1948-95 1.93%…”

“…Until the reorganisation of the accounts in 1998, the approach was fairly crude, so there was still scope for TFP studies. Thus, the MAFF series was supplemented by further academic attempts at TFP measurement, such as Thirtle and Bottomley (1992), Khatri (1994) and most recently Barnes (2002) and Amadi (2000).…”

“…Thus, TFP grew at an annual rate of 1.26% per annum, which is already lower than the recent UK results, noted in the introduction. Thirtle and Bottomley (1992) estimated TFP growth at 1.77% per annum, up to 1990 and Amadi (2000) and Barnes (2002) both cover the period to 1995, with estimates of 1.81% and 1.93% respectively.…”

“…Amadi (2000) had inputs falling at 0.96% per annum, whereas we now have only 0.38%. The oddest comparison is with Barnes (2002), whose series shows no downturn and has a growth rate of 3.25% from 1972-95. This seems to be a matter of data, as Barnes used the very broad aggregates reported by the Central Statistical Office (now the Office for National Statistics), rather than the MAFF or DEFRA data.…”