Abstract
AbstractIt is only when R&D levies are invested in the sectors in which they are raised that the distribution of the benefits among industry sectors is exactly the same as the incidence of the levies. This article examines the distributions of both costs and returns from the Australian grape and wine R&D investments and the divergence between the two distributions. The real shares of R&D costs are estimated through the incidence of the levies and compared with the nominal shares. Grape‐growers, winemakers and overseas consumers are shown to receive bigger proportions of gains than their proportions of costs, while the Australian government and other domestic parties as a group bear a much higher proportion of costs than returns. This article discusses implications of results for the equity issue between premium and nonpremium producers, the free‐rider issue for overseas consumers, and the justification of government funding of grape and wine R&D. [EconLit citations: Q16, Q18, and H43]. © 2003 Wiley Periodicals, Inc. Agribusiness 19: 355–366, 2003.
Highlights
The Australian grape and wine industry has undergone substantial changes and expansion in the last thirty years
In the case of the Australian grape and wine research and development (R&D) investments, the net impact will be determined by how the benefits as well as the costs are distributed across grape growers, winemakers, marketers and retailers, and domestic and overseas consumers
The objective of this paper is to study the distributions of costs and benefits of the Australian grape and wine industry R&D, using the results from a multi-sectoral equilibrium displacement model
Summary
The Australian grape and wine industry has undergone substantial changes and expansion in the last thirty years. In the case of the Australian grape and wine R&D investments, the net impact will be determined by how the benefits as well as the costs are distributed across grape growers, winemakers, marketers and retailers, and domestic and overseas consumers These distributions can be estimated based on the information on how the total R&D funds are spent across different parts of the chain, and who pays for each of these investments. I present a multi-sectoral model of the Australian grape and wine industry and report the distributions of the benefits among industry participants from technical progress in grape production, wine production and grape and wine quality The incidence of costs is compared with the incidence of benefits for the GWRDC funded R&D in Section 4, and implications are discussed in the final section
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