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The Induced Innovation Hypothesis and U.S. Public Agricultural Research

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  • Benjamin W. Cowan
  • Daegoon Lee
  • C. Richard Shumway

Abstract

Applicability of the induced innovation hypothesis-that a change in relative input prices induces innovation to economize use of the increasingly expensive input (Hicks 1932)-is examined for U.S. public agricultural research. A reduced-form test is developed using input prices from the agricultural production sector, expenditures from the public research sector aimed at developing new technology to save specific agricultural inputs, and variables to control for innovation marginal cost differences and nonhomotheticity. Unlike recent demand-side studies that soundly reject the induced innovation hypothesis for agriculture, support for the hypothesis is found for several input pairings through these tests of public agricultural research using state-level panel data.

Suggested Citation

  • Benjamin W. Cowan & Daegoon Lee & C. Richard Shumway, 2015. "The Induced Innovation Hypothesis and U.S. Public Agricultural Research," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 97(3), pages 727-742.
    • Handle: RePEc:oup:ajagec:v:97:y:2015:i:3:p:727-742.
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    File URL: http://hdl.handle.net/10.1093/ajae/aau090
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    Cited by:

    1. Zuzana Smeets Kristkova & Edward Smeets & Hans van Meijl, 2016. "Agricultural R&D investments, biofuel policy and food security – a CGE analysis," EcoMod2016 9966, EcoMod.
    2. J. M. C. Santos Silva & Silvana Tenreyro, 2022. "The Log of Gravity at 15," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 21(3), pages 423-437, September.
    3. Jean‐Paul Chavas & Céline Nauges, 2020. "Uncertainty, Learning, and Technology Adoption in Agriculture," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 42(1), pages 42-53, March.
    4. Qingsong Tian & Lukas Cechura & J. Stephen Clark & Yan Yu, 2023. "Induced innovation and spillover effects of US and Canadian research expenditures in Canadian agriculture," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 71(2), pages 153-169, June.
    5. Dario Schulz & Jan Börner, 2023. "Innovation context and technology traits explain heterogeneity across studies of agricultural technology adoption: A meta‐analysis," Journal of Agricultural Economics, Wiley Blackwell, vol. 74(2), pages 570-590, June.
    6. Queiroz, Pedro & Fulginiti, Lilyan & Perrin, Richard, 2021. "Induced Innovation in South American Agriculture: Deforestation and Directed Technical Change," 2021 Conference, August 17-31, 2021, Virtual 315416, International Association of Agricultural Economists.

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