We use newly constructed state-specific data to explore the implications of common modeling choices for measures of research returns. Our results indicate that state-to-state spillover effects are important, that the research and development lag is longer than many studies have allowed, and that misspecification can give rise to significant biases. Across states, the average of the own-state benefit-cost ratios is 21:1, or 32:1 when the spillover benefits to other states are included. These ratios correspond to real internal rates of return of 9 or 10 per annum, much smaller than those typically reported in the literature, partly because we have corrected for a methodological flaw in computing rates of return.
Bibliographical noteFunding Information:
Authorship is alphabetical.Alston is a professor in the Department of Agricultural and Resource Economics; director of the Robert Mondavi Institute Center for Wine Economics at the University of California, Davis; and a member of the Giannini Foundation of Agricultural Economics. Andersen is an assistant professor in the Department of Agricultural and Applied Economics at the University of Wyoming. James is a professor in the Department of Agribusiness at the California Polytechnic State University; and Pardey is a professor in the Department of Applied Economics and director of the International Science and Technology Practice and Policy (InSTePP) Center, both at the University of Minnesota. Alston,Andersen, and James are also research fellows at InSTePP. The authors thank Aaron Smith and an anonymous reviewer for their helpful insights, and Albert Acquaye, Jason Beddow, Connie Chan-Kang,Patricia Zambrano,and Mingxia Zhang for their excellent research assistance on various incarnations of this work going back to the mid-1990s. Thanks are due also to Dennis Unglesbee, Allen Moore, and Ed Kane of USDA CRIS, for their generous assistance with the R&D data. The work for this project was partly supported by the University of California; the University of Minnesota; the USDA’s Economic Research Service, Agricultural Research Service, and CSREES National Research Initiative; and the Giannini Foundation of Agricultural Economics.
- R&D lags
- U.S. states
- knowledge stocks
- public agricultural R&D
- spatial technology spillovers