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Agricultural Research Investment and Policy Reform in High-Income Countries, ERR-249, U.S United States Department of Agriculture Economic Research Agricultural Research Investment and Service Economic Policy Reform in High-Income Countries Research Report Number 249 Paul W. Heisey and Keith O. Fuglie May 2018 United States Department of Agriculture Economic Research Service www.ers.usda.gov Recommended citation format for this publication: Heisey, Paul W., and Keith O. Fuglie. Agricultural Research Investment and Policy Reform in High-Income Countries, ERR-249, U.S. Department of Agriculture, Economic Research Service, May 2018. Cover is a derivative of images from Getty Images. Use of commercial and trade names does not imply approval or constitute endorsement by USDA. To ensure the quality of its research reports and satisfy governmentwide standards, ERS requires that all research reports with substantively new material be reviewed by qualified technical research peers. This technical peer review process, coordinated by ERS' Peer Review Coordinating Council, allows experts who possess the technical background, perspective, and expertise to provide an objective and meaningful assessment of the output’s substantive content and clarity of communication during the publication’s review. In accordance with Federal civil rights law and U.S. Department of Agriculture (USDA) civil rights regulations and policies, the USDA, its Agencies, offices, and employees, and institutions participating in or administering USDA programs are prohibited from discriminating based on race, color, national origin, religion, sex, gender identity (including gender expression), sexual orientation, disability, age, marital status, family/parental status, income derived from a public assistance program, political beliefs, or reprisal or retaliation for prior civil rights activity, in any program or activity conducted or funded by USDA (not all bases apply to all programs). Remedies and complaint filing deadlines vary by program or incident. Persons with disabilities who require alternative means of communication for program information (e.g., Braille, large print, audiotape, American Sign Language, etc.) should contact the responsible Agency or USDA's TARGET Center at (202) 720-2600 (voice and TTY) or contact USDA through the Federal Relay Service at (800) 877-8339. Additionally, program information may be made available in languages other than English. To file a program discrimination complaint, complete the USDA Program Discrimination Complaint Form, AD-3027, found online at How to File a Program Discrimination Complaint and at any USDA office or write a letter addressed to USDA and provide in the letter all of the information requested in the form. To request a copy of the complaint form, call (866) 632-9992. Submit your completed form or letter to USDA by: (1) mail: U.S. Department of Agriculture, Office of the Assistant Secretary for Civil Rights, 1400 Independence Avenue, SW, Washington, D.C. 20250-9410; (2) fax: (202) 690-7442; or (3) email: [email protected]. USDA is an equal opportunity provider, employer, and lender. United States Department of Agriculture Economic Research Agricultural Research Investment and Service Policy Reform in High-Income Countries Economic Research Report Number 249 Paul W. Heisey and Keith O. Fuglie May 2018 Abstract Investment in research is a primary driver of productivity growth in agriculture. However, in high-income countries, as agriculture’s contribution to national economies declines, many public agricultural research systems face stagnant or falling financial support while research costs continue to rise. Public spending on agricultural research and development in high-income member countries of the Organisation for Economic Co-operation and Development as a whole has fallen in real (inflation-adjusted) terms since at least 2009. At the same time, society’s expectations of food and agricultural systems have evolved to include a broader set of issues. These forces have induced pressure to reform agricultural research policies. Lessons from research policy reforms include accommodating a larger role for private firms in conducting agricultural research, diversifying funding sources to broaden the public research agenda, and providing stronger incentives for producer-levy funding of research. Keywords: agricultural research and development (R&D); agricultural research policy; agri- cultural productivity; research costs; public and private R&D; farmer-funded research; plant breeding royalties Acknowledgments The authors thank technical peer reviewers Greg Graff of Colorado State University, Vincent Smith of Montana State University, and Lorraine Mitchell of USDA’s Economic Research Service (ERS). We also thank James MacDonald of ERS for his encouragement of this study as well as useful suggestions, Kathleen Flaherty and Nienke Beintema of the Agricultural Science and Technology Indicators (ASTI) program—International Food Policy Research Institute (IFPRI), and Michiel van Dijk of the International Institute for Applied Systems Analysis (IIASA) for helpful discussions regarding data sources and methodology; as well as John Weber, Margaret Carter, and Curtia Taylor of ERS for editing and design. Contents Summary . v Introduction . 1 Basic Concepts and Data Sources .................................................5 Organization and Structure of Public Agricultural Research Systems . 7 Agricultural R&D Investments and Productivity . 10 Public Agricultural R&D Spending and Its Relationship to Agricultural Policy Goals Since 1960 .............................................10 The Growing Role of the Private Sector in Agricultural R&D ..........................12 Assessing the Impact of R&D on Agricultural Productivity ............................14 Some Economic Fundamentals of Public Investment in Agricultural R&D . 22 Agriculture Commands a Relatively Large but Declining Share of Public R&D ............22 As Countries Get Richer, Agriculture’s Share of Public R&D Declines ...................25 Public Agricultural R&D Investment Has Tended To Rise Faster Than Agricultural GDP, but for Several High-Income Countries, This Trend Has Reversed ..................26 Research Costs Rise Faster Than the General Rate of Inflation .........................30 Research in the United States Costs More Than Research in Most Other Countries .........34 Agricultural R&D Policy Reforms . 35 The Stokes-Ruttan Paradigm for Public and Private Roles in R&D Systems ...............36 Reforms To Accommodate Private-Led Food and Agricultural Innovation ................38 Reforms To Enhance Farmer Funding of R&D Through Levies on Commodity Production ................................................42 Reforms Establishing Royalty Systems To Encourage Investment in Crop Breeding .........47 Responses to Increased Private-Sector Research Investment in the United States ...........48 Conclusions . 50 References . 52 Appendix A . Some Historical Changes in Public Agricultural Research Organization in High-Income Countries . 60 Appendix A References ........................................................62 Appendix B . Data Sources on Agricultural R&D Spending and the Agricultural Sector in High-Income Countries . 65 Concepts for Estimates of Agricultural R&D .......................................65 Estimates of Public Agricultural R&D Expenditures for Individual Countries. .68 Canada (North America) .......................................................68 ii Agricultural Research Investment and Policy Reform in High-Income Countries, ERR-249 USDA, Economic Research Service Contents—continued United States (North America) ..................................................70 Japan (Asia-Oceania) ..........................................................70 South Korea (Asia-Oceania) ....................................................71 Australia (Asia-Oceania) .......................................................72 New Zealand (Asia-Oceania) ....................................................72 Austria (Europe, NW) .........................................................73 Belgium (Europe, NW) ........................................................74 Denmark (Europe, NW) .......................................................75 Finland (Europe, NW) .........................................................75 France (Europe, NW) ..........................................................76 Germany (Europe, NW). .79 Iceland (Europe, NW) .........................................................80 Ireland (Europe, NW) .........................................................80 Luxembourg (Europe, NW) .....................................................81 Netherlands (Europe, NW) .....................................................81 Norway (Europe, NW) .........................................................82 Sweden (Europe, NW). 83 Switzerland (Europe, NW) ......................................................83 United Kingdom (Europe, NW) ..................................................84 Greece (Mediterranean). .85 Israel (Mediterranean) .........................................................86 Italy (Mediterranean) ..........................................................87 Portugal (Mediterranean) .......................................................88 Spain (Mediterranean) .........................................................88 Europe, Central (general) .......................................................89 Czech Republic/Slovakia, former Czechoslovakia (Europe, Central) .....................90 Estonia
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