The Analysis of the Effects of Domestic and Foreign Investment in R&D on Agricultural TFP in Iran

Nowadays, agricultural R&D provides new and developed technologies to create modern agricultural producing methods. During recent years, improving agricultural productivity is affected by not only domestic R&D investments but also foreign countries R&D investments. Nowadays, according to new growth models, R&D is the base of productivity. Recent economics theories consider agricultural research and it`s spill overs as important factors for technological change and economic growth. This paper investigates the amount of agricultural total factor productivity in Iran and analyzes the relationship between TFP, domestic agricultural research, and foreign agricultural R&D during 1979 – 2008. In this study Iran`s partners are 20 Asian, European and South American countries. The Solow residual index approach is applied for the measurement of total factor productivity in agricultural sector of Iran. ARDL model involving different lag length specifications were estimated taking TFP as a dependent variable. The results indicate that agricultural researches (both domestic and foreign R&D) have positive and significant impact on agricultural TFP. But the impact of foreign R&D on agricultural productivity is stronger than the effect of domestic R&D. According to gained results considerable portion of national product should be allocated to R&D costs and research budget of agricultural sector should be increased to standard level. Also government should pay attention to it`s partner countries because agricultural R&D spill over of developed countries is more than developing countries.