Efficiency and equity considerations in financing agricultural research and extension

Abstract

Benefits resulting from agricultural research and extension activities conducted in one region may affect producers and consumers throughout the country. Measurement of these benefit spillovers is required to equitably and efficiently finance these activities. Spillover benefit ratios per dollar of internal benefits for all farm production regions in the United States are calculated using an economic surplus framework to account for the effects of research and extension on both producers and consumers. In nine out of ten regions, the spillover ratios are greater than one, indicating that benefits accruing outside the region conducting research and extension activities are greater than the benefits accruing internally to the region. The average spillover ratio, which is 3.71 for all regions, is greater than the ratio of federal expenditures to regional expenditures. The implication of these ratios being unequal is that the federal contribution would need to be increased in order for regional costs to match regional benefits.