Aggregate private R&D investments in agriculture: The role of incentives, public policies, and institutions

The objective of this article is to present econometric evidence quantifying the effects of economic incentives, public policies, and institutions on national aggregate private agricultural R&D investments or expenditures. Previous studies have generally emphasized only one or at most two of these issues, but the primary hypothesis of this article is that all three are important and that interactions exist among them. Although the European Union (EU) is undergoing major economic integration, member countries continue to exhibit substantial differences in institutions, public policies, size, and relative importance of agriculture. Hence, these countries provide a good set of observations for testing our main hypothesis. A model is formulated and fitted to annual data for nine EU countries, for the period 1984-95; we find strong impacts of incentives, public policies, and institutions on private aggregate agricultural R&D investment; we find interactions between public policies and institutions. Furthermore, for the EU countries in this study, the evidence is that public agricultural R&D crowds-out private agricultural R&D investments at low levels of private R&D, but at high levels of private R&D, they are complementary. © 2003 by The University of Chicago. All rights reserved.