THE CALCULATION OF RATES OF RETURN ON AGRICULTURAL RESEARCH FROM PRODUCTION FUNCTIONS

Abstract

A general framework is described whereby, using production functions, the rate of return on additional agricultural R & D can be calculated. This enables existing procedures to be critically reviewed. Illustrative results are given which indicate that the rates of return found in previous studies tend to be overestimates. It is also pointed out that these studies usually refer to well in the past, when the level of the agricultural research investment was generally lower and rates of return consequently larger than might now be expected. It is, however, concluded that the production‐function approach needs extension and refinement, and better values of key parameters determined, before it could be used quantitatively as a determinant of research policy.