A meta-analysis of rates of return to agricultural R and D. Ex Pede Herculem?

J. M. Alston, C. Chan-Kang, M. C. Marra, P. G. Pardey, T. J. Wyatt

Research output: Contribution to journalArticle

19 Scopus citations

Abstract

Conventional wisdom is that investments in agricultural R and D have yielded handsome dividends for society, more than enough to justify past investments and to support increased funding in the future. Many cite annual rates of return in the range of 40-60 percent as the norm, although some have suggested that these estimates are biased upwards or represent a partial and possibly biased sample of the overall rate-of-return evidence. Past reviews of the evidence on rates of return to agricultural research have been generally descriptive in nature, usually ad hoc, and always partial. The entire body of work has not been subjected to systematic, quantitative scrutiny of the types needed if we were to adequately answer various questions that have relevance to decisionmakers concerned with agricultural R and D. We assembled 292 studies reporting a total of 1,886 rate of return estimates-an average of 6.5 estimates per published study. About one-third of the publications were in refereed journals. Few (21 percent) of the published rate of return estimates fall within the range of conventional wisdom of 40-60 percent per year. Excluding two extreme outlier observations (724,323 and 455,290 percent per year), the average rate of return was 100 percent per year for research, 85 percent for extension, 48 percent for studies that estimated the returns to research and extension jointly, and 81 percent for all the studies combined. However, these averages give an incomplete and in some important ways misleading picture. The rate of return estimates are widely dispersed around their respective averages. For example, studies of returns to research reported estimates of annual rates of return ranging from -7.4 percent to 5,645 percent. To demonstrate the effects of skewness on measures of central tendency in the various distributions of estimates of rates of return, we report the mode (the value of the most frequent observation) and median (the central value when observations are arrayed by size), in addition to the mean (or simple average). The median of the rate of return estimates was 48.0 percent per year for research, 62.9 percent for extension studies, 37 percent for studies that estimated the returns to research and extension jointly, and 44.3 percent for all studies combined. This is almost half the corresponding average, indicating significant positive skewness in the distribution of rates of return. What accounts for the substantial variation in the reported rates of returns? We posited a number of factors, grouped into four broad categories: Characteristics of the rate of return measure (for example, real versus nominal measures, ex post versus ex ante, average versus marginal, private versus social) Characteristics of the analysts performing the evaluation (factors intended to reveal possible bias or differences in precision of the measures associated with the attributes of the person or group that generated the estimate, or differences in the methods and approaches used that are not revealed by our other proxies) Characteristics of the research being evaluated (for example, the field of science, commodity class, type of technology, time period and geographical location, and institutional scope of the research being evaluated) Features of the evaluation (details of the methodologies used to estimate the returns to research, like the structure and length of the lag between R and D spending and its productivity consequences).

Original languageEnglish (US)
Pages (from-to)1-148
Number of pages148
JournalResearch Report of the International Food Policy Research Institute
Issue number113
StatePublished - Jan 1 2000

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