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Measuring the Returns to Investment in RD&E in the WA Grains Industry Using Equilibrium Displacement Modelling

Author

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  • Li, Kuo
  • Kingwell, Ross
  • Griffith, Garry
  • Malcolm, Bill

Abstract

Equilibrium Displacement Models (EDMs) are useful for estimating the net benefits of investments in agricultural research, development and extension (RD&E) and the distribution of these benefits between producers and other participants in the value chain. Information from these models can inform investment decisions by funders of RD&E. In this paper the design and construction of an EDM for the Western Australian grains industry, a major component of the national grains industry, is reported. Using the EDM, two RD&E investment scenarios are examined. The first scenario is for a 1 per cent reduction in the cost of farm production inputs as a result of an investment in RD&E, while the second scenario involved a 1 per cent increase in the willingness of overseas consumers to pay for wheat as a result of an investment in RD&E. The results show that the farm sector and overseas consumers are the major beneficiaries under each scenario. The WA grains industry is characterised by a short supply chain, where most grain production is exported. The large volume of grain exported means that, if there is an increase in demand or supply, some of the total benefits go to consumers overseas. Still, a high price elasticity of demand for export grains ensures that the farm production sector receives the majority of total benefits, and that these benefits outweigh the share of benefits received by overseas consumers.

Suggested Citation

  • Li, Kuo & Kingwell, Ross & Griffith, Garry & Malcolm, Bill, 2019. "Measuring the Returns to Investment in RD&E in the WA Grains Industry Using Equilibrium Displacement Modelling," Australasian Agribusiness Review, University of Melbourne, Department of Agriculture and Food Systems, vol. 27(4).
    • Handle: RePEc:ags:auagre:292474
    DOI: 10.22004/ag.econ.292474
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    Cited by:

    1. Sarah Rohr & Stuart Mounter & Derek Baker, 2024. "Implications for Economic Sustainability of Food Systems from Reductions in Household Food Waste: The Case of the Australian Apple Industry," Sustainability, MDPI, vol. 16(3), pages 1-14, January.
    2. Lana Awada & Peter W. B. Phillips, 2021. "The distribution of returns from land efficiency improvement in multistage production systems," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 69(1), pages 73-92, March.
    3. Li, Kuo & Malcolm, Bill & Griffith, Garry & Kingwell, Ross, 2022. "A Model of the Southern Australian Grains Industry," Australasian Agribusiness Review, University of Melbourne, Department of Agriculture and Food Systems, vol. 30(2), April.

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