PRIVATE R&D INVESTMENTS IN AGRICULTURE: THE ROLE OF INCENTIVES AND INSTITUTIONS

This paper presents econometric evidence of the effects of economic incentives and institutions on national aggregate private agricultural R&D investments. A model is proposed and fitted to annual data for seven European Union countries, 1984-1995. We find strong impacts of both incentives and institutions on private agricultural R&D investment, and including institutional factors strengthens the story and in some cases changes greatly the results. In particular, we reject the hypothesis that quality of property rights does not matter. We find that stronger contract enforcement, more efficient public bureaucracies, and stronger patent rights lead to larger aggregate private agricultural R&D investment, other things equal. Furthermore, we show that the impact of a country's patent rights on private agricultural R&D investment is amplified by it also having a more efficient public bureaucracy and a larger stock of agricultural higher education capital. We also find evidence of public R&D crowding-out private agricultural R&D, which does support recent privatization policies. Inter-country private R&D spillins increase national agricultural R&D investment.