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The Relationship Between the Economic Surplus and Production Function Approaches for Estimating Ex-Post Returns to Agricultural Research

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  • Davis, Jeffrey S.

Abstract

The objective of this paper is to develop the conceptual linkage between the production function and economic surplus approaches used to evaluate the returns to agricultural research. First it is established that, for the Cobb-Douglas functional form generally used, an increase in research expenditure will result in a pivotal divergent shift in the supply function. It is then shown that the measure of this change in economic surplus is approximately the same as the value marginal product. Finally it is concluded that if the other possible types of supply shifts, that is, proportional divergent, parallel or convergent, are appropriate, then the production function approach will under-estimate the benefits and therefore rate of return to research expenditure.

Suggested Citation

  • Davis, Jeffrey S., 1981. "The Relationship Between the Economic Surplus and Production Function Approaches for Estimating Ex-Post Returns to Agricultural Research," Review of Marketing and Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 49(02), pages 1-11, August.
    • Handle: RePEc:ags:remaae:12425
    DOI: 10.22004/ag.econ.12425
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    References listed on IDEAS

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    1. Currie, John Martin & Murphy, John A & Schmitz, Andrew, 1971. "The Concept of Economic Surplus and its Use in Economic Analysis," Economic Journal, Royal Economic Society, vol. 81(324), pages 741-799, December.
    2. Jeff Davis, 1981. "A Comparison Of Procedures For Estimating Returns To Research Using Production Functions," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 25(1), pages 60-72, April.
    3. George W. Norton & Jeffrey S. Davis, 1981. "Evaluating Returns to Agricultural Research: A Review," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 63(4), pages 685-699.
    4. Davis, Jeffrey S., 1981. "A Comparison Of Procedures For Estimating Returns To Research Using Production Functions," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 25(1), pages 1-13, April.
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    Cited by:

    1. Thirtle, Colin, 1986. "The Production Function Approach to the Relationship Between Productivity Growth and R & D," Manchester Working Papers in Agricultural Economics 232791, University of Manchester, School of Economics, Agricultural Economics Department.
    2. David N. Bengston, 1985. "Economic Evaluation of Agricultural Research," Evaluation Review, , vol. 9(3), pages 243-262, June.
    3. Michael Harris & Alan Lloyd, 1991. "The Returns to Agricultural Research and the Underinvestment Hypothesis ‐ A Survey," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 24(3), pages 16-27, July.
    4. Radhakrishnan, Manju & Islam, Nazrul & Ward, Glynn, 2009. "Measuring the benefits from R&D investment beyond the farm gate: the case of the WA wine industry," 2009 Conference (53rd), February 11-13, 2009, Cairns, Australia 48169, Australian Agricultural and Resource Economics Society.
    5. Vernon Ruttan, 1982. "Bureaucratic productivity: The case of agricultural research revisited — A rejoinder," Public Choice, Springer, vol. 39(2), pages 319-329, January.
    6. Harvey A. Averch, 1994. "Economic Approaches To the Evaluation of Research," Evaluation Review, , vol. 18(1), pages 77-88, February.

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