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The Role of R&D in Productivity Growth: The Case of Agriculture in New Zealand: 1927 to 2001

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Productivity growth is a key determinant of rising living standards. The agricultural sector has been an important contributor to the overall growth of productivity in New Zealand. The average rate of multifactor productivity growth in agriculture from 1926-27 to 2000-01 was 1.8%. We find evidence that this rate has been increasing especially since the reforms of the 1980s. This paper estimates the contribution that R&D has made to agricultural productivity. It develops a theoretical framework based on the stock of knowledge available to producers. This model incorporates foreign stocks of knowledge and the spill-in effect for New Zealand. The estimation allows for extended lag effects of research spending on productivity. We find that foreign knowledge is consistently an important factor in explaining the growth of productivity. It appears that the agricultural sector relies heavily on drawing on the foreign stock of knowledge generated off-shore. The contribution of domestic knowledge generated by New Zealand’s investment in R&D is less clear cut. However, there is typically a significant positive relation between domestic knowledge and the growth of productivity. We find a wide range of estimates of the return to domestic R&D. The results are sensitive to the type of model used and the specification of the variables. Based on our preferred model we estimate that investment in domestic R&D has generated an annual rate of return of 17%. The results underscore the importance of foreign knowledge in a small open economy. The very existence of foreign knowledge may be a necessary condition for achieving productivity growth in a small open economy. However in no way could it be argued that this was sufficient. Having a domestic capability that can receive and process the spill-ins from foreign knowledge is vital to capturing the benefits. The challenge is to be able to isolate those effects from aggregate data for the agricultural sector. In that task we claim only modest success.

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  • Julia Hall & Grant M Scobie, 2006. "The Role of R&D in Productivity Growth: The Case of Agriculture in New Zealand: 1927 to 2001," Treasury Working Paper Series 06/01, New Zealand Treasury.
    • Handle: RePEc:nzt:nztwps:06/01
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    Cited by:

    1. Grafström, Jonas, 2017. "An Econometric Analysis of Divergence of Renewable Energy Invention Efforts in Europe," Ratio Working Papers 295, The Ratio Institute.
    2. Cao, Kay & Forbes, Rod, 2007. "Productivity in the New Zealand Primary and Downstream Sectors," Australasian Agribusiness Review, University of Melbourne, Department of Agriculture and Food Systems, vol. 15.
    3. Tomas RATINGER & Zuzana KRISTKOVA, 2015. "R&D Investments, technology spillovers and agricultural productivity, case of the Czech Republic," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 61(7), pages 297-313.
    4. repec:oup:apecpp:v:40:y:2018:i:3:p:421-444. is not listed on IDEAS
    5. Xincai Gao & Lin Ji & Abbas Ali Chandio & Amber Gul & Martinson Ankrah Twumasi & Fayyaz Ahmad, 2022. "Towards Sustainable Agriculture in China: Assessing the Robust Role of Green Public Investment," Sustainability, MDPI, vol. 14(6), pages 1-18, March.
    6. Huynh, Cong Minh, 2022. "How does research and development affect the nexus of climate change and agricultural productivity in Asian and Pacific countries?," MPRA Paper 112628, University Library of Munich, Germany.
    7. Garcia-Alvarez-Coque, J.-M. & Gharsi, O. & Martinez-Gomez, V. & Roig-Tierno, N., 2018. "Determinant Factors of High Performing Agricultural Regions," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277456, International Association of Agricultural Economists.
    8. Zuzana Smeets Kristkova & Edward Smeets & Hans van Meijl, 2016. "Agricultural R&D investments, biofuel policy and food security – a CGE analysis," EcoMod2016 9966, EcoMod.
    9. Grafström, Jonas & Söderholm, Patrik & Gawel, Erik & Lehmann, Paul & Strunz, Sebastian, 2017. "Knowledge Accumulation from Public Renewable Energy R&D in the European Union: Converging or Diverging Trends?," Ratio Working Papers 292, The Ratio Institute.
    10. Andersen, Matthew A., 2019. "Knowledge productivity and the returns to agricultural research: a review," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 63(2), April.
    11. Mullen, John D. & Scobie, Grant M. & Crean, Jason, 2006. "Trends in Research, Productivity Growth and Competitiveness in Agriculture in New Zealand and Australia," 2006 Conference, August 24-25, 2006, Nelson, New Zealand 31965, New Zealand Agricultural and Resource Economics Society.
    12. Grafström, Jonas & Lindman, Åsa, 2017. "Invention, innovation and diffusion in the European wind power sector," Technological Forecasting and Social Change, Elsevier, vol. 114(C), pages 179-191.
    13. Nasir nadeem, Dr. & khalid Mushtaq, Dr., 2010. "Role of Agricultural Research and Extension in Enhancing Agricultural Productivity in Punjab, Pakistan," MPRA Paper 27769, University Library of Munich, Germany.
    14. Aaron Drew, 2007. "New Zealand's productivity performance and prospects," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 70, March.
    15. Jonas Grafström, 2018. "Divergence of renewable energy invention efforts in Europe: an econometric analysis based on patent counts," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 20(4), pages 829-859, October.
    16. Zuzana Smeets Kristkova & Michiel van Dijk & Hans van Meijl, 2015. "Long-term projections of global food security with R&D-driven technological progress," EcoMod2015 8601, EcoMod.
    17. Grafström, Jonas & Jaunky, Vishal, 2017. "Convergence of Incentive Capabilities within the European Union," Ratio Working Papers 301, The Ratio Institute.
    18. Bannor, Frank & Dikgang, Johane & Gelo, Dambala, 2021. "Agricultural total factor productivity growth, technical efficiency, and climate variability in sub-Saharan Africa," EconStor Preprints 231310, ZBW - Leibniz Information Centre for Economics.
    19. Bannor, Frank & Dikgang, Johane & Kutela Gelo, Dambala, 2021. "Interdependence between research and development, climate variability and agricultural production: evidence from sub-Saharan Africa," MPRA Paper 105697, University Library of Munich, Germany.

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    Keywords

    New Zealand; technological change; R&D; productivity; economics of knowledge; spillovers; rates of return; agriculture;
    All these keywords.

    JEL classification:

    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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