Productivity and the Returns to Levy‐Funded R&D for Sugar Production in the Eastern Counties of England

Estimates of the rate of return (ROR) to publicly funded‐agricultural research are getting lower as private expenditures and spill‐overs are more adequately handled. For UK sugar beet there is a pool of technology available and the spill‐ins are not measurable. An alternative approach is to assume that the difference between productivity growth in sugar and the rest of UK agriculture is attributable to the Sugar Beet Research and Education Committee's R&D and extension expenditures, funded by the only long‐standing producer levy in the UK. These expenditures are used to explain the difference between total factor productivity (TFP) growth in sugar (3.5 per cent per annum) and the rest of UK agriculture (2.0 per cent per annum). The producer's ROR calculated using this approach is 11 per cent and the lower bound on the total return, to producers and consumers is 21 per cent, whereas the conventional methodology gives returns of 87 per cent. Thus, the upward bias in ROR calculations may be removed by changing the approach to the problem.