Evaluation of the Importance and Magnitude of Agricultural Maintenance Research in the United States by Edward Opoku Adusei Dissertation submitted to the Faculty of the Virginia Polytechnic Institute and State University in partial fulfillment of the requirements for the degree of Doctor of Philosophy 1Il Agricultural Economics APPROVED: Dr. George W. Norton, Co-chairman Dr. Bradf&'CJieaton, Co-chairman Dr. David E. Kenyon Dr. ~:pomas Jolmson October, 1987 Blacksburg, Virginia Evaluation of the Importance and Magnitude of Agricultural Maintenance Research in the United States by Edward Opoku Adusei Dr. George W. Norton, Co-chairman Dr. Brady J. Deaton, Co-chairman Agricultural Economics (ABSTRACT) The United States has invested substantial resources in agricultural research since the Morrill and the Hatch Acts. These investments have made American agriculture one of the most productive in the world. Several studies have evaluated U.S. agricultural re- search. However, few of these studies have attempted to assess the decline in agricul- tural productivity that would have resulted in the absence of agricultural research. The purpose of this dissertation is to measure the magnitude of agricultural maintenance re- search currently or recently undertaken to forestall such productivity declines. A two part procudure was used to evaluate the importance of maintenance research in U.S. agriculture. First, questionnaires were mailed to agricultural scientists at the state agricultural experiment stations. The information sought from the scientists included examples of maintenance research and research depreciation, their annual research budgets, and the percentage of their research efforts devoted to maintenance research. The second part of the procedure was to estimate a profit function model to assess the importance of research depreciation in U.S. agriculture and to test the overall length and shape of the research lag. Duality theory was used to obtain the output supply (foodgrains, feedgrains, other crops, hay, livestock, and poultry), input demand (feed, fertilizer, fuel, and labor) equations. The fixed factors included were land, research, ex- tension, education, capital, and breeding stock. Secondary data, from various sources, were used to estimate the equations. The results from the responses to the questionnaire indicate that, on average, the United States devotes roughly a third of total agricultural production research to maintenance research. In addition, there are significant differences in maintenance research among individual commodities. The results from the output supply equations indicated that the impact of agricultural research on agricultural output rises and then declines for some commodities. Also, re- search depreciation occurs for some agricultural commodities and maintenance research may be required to prevent productivity from declining. However, the results were for the most part, not statistically significant, reducing the strength of the conclusion that can be drawn. Ackno\vledgements My graduate studies have been very rewarding to me. I have gained knowledge and more exposure to economic issues related to agriculture. The most important aspect of this experience was writing this dissertation. It involved an enormous ammount of work and my committee members were patient and cooperative to see this work come to a fruitful conclusion. First, I wish to extend my appreciation and gratitude to Dr. George W. Norton, my major advisor, who helped develop the genesis of this work. He offered his time, and made helpful comments and suggestions on the content and style of this dissertation. Dr. Brady Deaton contributed significantly to this study with his suggestions and com- ments. But more importantly, he was helpful on my graduate program as a whole. I take this opportunity to thank them both for imparting their knowledge and experiences on me throughout the four years of my graduate program. Acknowledgements iv I must thank the other members of my advisory committee. Dr. Thomas Johnson, Dr. David Kenyon, and Dr. Daniel Taylor made valuable suggestions for improving this dissertation. I wish to thank Dr. Randall Kramer for his contribution to this study. There are a number of other people who helped me to complete this dissertation. First, I thank all the agricultural scientists who responded to the maintenance research ques- tionnaire, and Mr. Dennis Unglesbee of United States Department of Agriculture for providing the names and location of agricultural scientists in the United States. I must thank the staff at the College of Agriculture Data Laboratory for helping to assemble the data. I thank Gerald Spittle, David Woodall-Gainey, Todd Pukanecz, Wendi Biggs, and Dedra Jordan. I will not be fair to myself if I do not include two staff members of the Department of Agricultural Economics, Virginia Tech. I wish to express my appreciation to Mrs. Daisy Ayers who was always there to answer questions and see to it that things were done right and on time. Daisy, thank you. Next is Mrs. Lee Thunberg. She helped in formating the questionnaire, the tables, and guided me on the use of script. I thank you for your help. My colleagues also gave words of encourgement along the way. I wish to thank Mesfin Bezuneh for his philosophical discussions on the universe; Segu Zuhair for the dicussions deep into the night on agricultural issues in developing countries and other things. Tammy Kirkpatrick and Rich Kazmierczak always asked me which stage I was on the stuff (our term for dissertation); it was good to know that others were interested in what I was doing. To Dave Kraybill and Pyengmu Bark, thank you both for taking the time to talk about economics and politics. Acknowledgements v Finally, I wish to thank my family. My mother has been patient and generous to see me through all my school years. I thank you mother. Mr. M.Y. Appaw and Ms. Rose Antwi have been influential in my life. Thank you for all the support you have given to me. My wife, Sandra N. Adusei and my children, Serwah Opoku Adusei and Edward 0. Adusei Jr. have put up with my late hours to the very last minute of my graduate program; it has been difficult and I must thank you for your support. This dissertation is dedicated to my deceased father. Acknowledgements vi Table of Contents Chapter l ............................................................. INTRODUCTION ..................................................... l.l The Problem ....................................................... 2 l.2 Objectives of the study . 3 l.3 Hypotheses . 4 1.4 Procedure . 4 l.5 Organization of the Dissertation . 5 Chapter 2 .............................................................. 6 LITERATURE REVIEW . 6 2.1 Introduction . 6 2.2 Maintenance Research . 7 2.2. l Conceptual Issues . 7 2.2.2 Examples of Maintenance Research . 9 2.3 The Lag Structure of Research Impacts . 13 2.3.1 Conceptual Issues . 13 2.4 Review of Previous Empirical Studies of Maintenance Research and of Lagged Research Impacts . 14 Table of Contents vii 2.5 Summary of Chapter . 21 Chapter 3 . 22 METHODS ........................................................... 22 3.1 Introduction . 22 3.2 Scientist Questionnaire . 23 3.3 Model to Measure Research Lag . 25 3.4 The Profit Function . 33 3.5 The Econometric Model . 36 3.6 The Data and Construction of Variables . 39 3.6. l Introduction . 39 3.6.2 Output . 40 3.6.2. l Foodgrains . 40 3.6.2.2 Feedgrains . 40 3.6.2.3 Other Crops . 41 3.6.2.4 I-lay ....................................................... : 41 3.6.2.5 Poultry . 41 3.6.2.6 Milk . 42 3.6.2.7 Livestock other than Poultry and Dairy .............................. 42 3.6.3 Transformations of Output Quantities . 43 3.6.4 Output Prices . 43 3.6.5 Inputs . 45 3.6.5. l Fuel . 45 3.6.5.2 Labor . 45 3.6.5.3 Fertilizer . 47 3.6.5.4 Feed . 48 3.6.6 Profit . 48 3.6.7 Fixed Factors .................................................. 49 3.6. 7.1 Land Stock . 49 Table of Contents viii 3.6.7.2 Rainfall . 50 3.6.7.3 Research and Extension .......................................... 51 3.6.7.4 Specification of the Research lag . 53 3.6.7.5 Education . 56 3.6.7.6 Capital Stock . 57 3.6.7.7 Breeding Stock . 58 3.6.7.8 Omitted Variables . 59 3. 7 Econometric Estimation . 60 3. 7.1 Introduction . 60 3. 7.3 Specification of the Normalized Profit Function . 60 3.7.3 The Technique Used to Estimate the Input Demand and the Output Supply Equations 66 3.8 Summary of Chapter . 66 Chapter 4 . 68 RESULTS AND DISCUSSION OF SCIENTIST QUESTIONNAIRE ............... 68 4.1.