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Determinants of the Demand for State Agricultural Experiment Station Resources: A Demand-System Approach

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  • Huffman, Wallace
  • Evenson, Robert

Abstract

We document the decline in traditional federal government support of the state agricultural experiment station system over the 20 years period starting in 1980 and of state government support over the 1990s. This paper presents a model of state government decisions on agricultural research expenditures. The model permits some benefits to be private in the sense that they are state specific and others to be public and spillover to other states. To capture a key aspect of agricultural research, the model includes voluntary and nonvoluntary contributions to a state government’s expenditures on agricultural research. Moreover, we argue that different types and sources of contributions to a state’s agricultural research expenditures can be expected to differ in their potential for private and public good production. The econometric model treats federal grants, federal formula funds and private contract, and a state’s own appropriates for agricultural research as separate inputs in a state government’s demand system for agricultural research. Involuntary transfers are from interstate public and within state spillins. The demand system is fitted to a panel of 48 contiguous states over 1970 to 1999. These results show that the income elasticity of demand for federal grants and private contracts is larger than one (elastic), for state funds is approximately one, and for federal formula funds is significantly less than one (inelastic). We also show that the national ranking of graduate doctorate faculty in basic biological science and capacity in the agricultural experiment station for basic biological science research increase the demand for federal grant and contract resources. The demand for state government support of SAES research is increased by a high Gourman ranking of graduate agricultural science programs.

Suggested Citation

  • Huffman, Wallace & Evenson, Robert, 2003. "Determinants of the Demand for State Agricultural Experiment Station Resources: A Demand-System Approach," ISU General Staff Papers 200312010800001236, Iowa State University, Department of Economics.
    • Handle: RePEc:isu:genstf:200312010800001236
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    1. Wallace E. Huffman & Richard E. Just, 2000. "Setting Efficient Incentives for Agricultural Research: Lessons from Principal-Agent Theory," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 82(4), pages 828-841.
    2. Todd Sandler, 1998. "Global and regional public goods: a prognosis for collective action," Fiscal Studies, Institute for Fiscal Studies, vol. 19(3), pages 221-247, August.
    3. Wallace E. Huffman & Richard E. Just, 1999. "Agricultural Research: Benefits and Beneficiaries of Alternative Funding Mechanisms," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 21(1), pages 2-18.
    4. Cornes,Richard & Sandler,Todd, 1996. "The Theory of Externalities, Public Goods, and Club Goods," Cambridge Books, Cambridge University Press, number 9780521477185, September.
    5. Wallace E. Huffman & Richard E. Just, 1994. "Funding, Structure, and Management of Public Agricultural Research in the United States," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 76(4), pages 744-759.
    6. Khanna, Jyoti & Huffman, Wallace E & Sandler, Todd, 1994. "Agricultural Research Expenditures in the United States: A Public Goods Perspective," The Review of Economics and Statistics, MIT Press, vol. 76(2), pages 267-277, May.
    7. Deaton, Angus S & Muellbauer, John, 1980. "An Almost Ideal Demand System," American Economic Review, American Economic Association, vol. 70(3), pages 312-326, June.
    8. Huffman, Wallace E. & Evenson, Robert E., 1993. "Science for Agriculture: A Long Term Perspective," Staff General Research Papers Archive 10997, Iowa State University, Department of Economics.
    9. Huffman, Wallace E. & Evenson, Robert E., 2003. "New Econometric Evidence On Agricultural Total Factor Productivity Determinants: Impact Of Funding Sources," Working Papers 18201, Iowa State University, Department of Economics.
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    Cited by:

    1. Michael J. Rizzo, 2005. "The public interest in higher education," Proceedings, Federal Reserve Bank of Cleveland, pages 19-45.
    2. Huffman, Wallace E. & Evenson, Robert E., 2003. "New Econometric Evidence On Agricultural Total Factor Productivity Determinants: Impact Of Funding Sources," Working Papers 18201, Iowa State University, Department of Economics.

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    JEL classification:

    • Q10 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - General

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