Evaluating the Research Benefits for Traded Commodities

A great deal of attention has been devoted in the last two decades to assessing the economic consequences of agricultural research. The biotechnology revolution (see, for example, Hueth and Just, 1986; Kalter and Tauer, 1986) may provide a further stimulus to study of the size and distribution of the benefits and costs of research. The present paper is in two parts. The first part outlines the approach used by Edwards and Freebairn [1981, 1984] to study the benefits from cost-reducing research. The approach is a simple, partial equilibrium one, but it incorporates the tradeabi1ity of commodities and the fact that research may reduce costs in the country of primary concern and/or in the rest of the world. Some results obtained with this approach are summarized, and an illustration gives estimates of the benefits to Australia and the rest of the world from research-induced cost reductions in the wheat industry. The second part of the paper contains observations on some additional issues that are relevant in assessing the economics of research for tradeable commodities. The issues are: choice of objective function in cost-benefit analysis of agricultural research; disaggregation into more than two sectors; effect of market distortions on benefits from research; property rights and trade in inputs; equity in distribution of the benefits and costs of research; and demand-shifting research and promotion. Most of these appear to be issues on which further research is appropriate.