| During the past 40 years, the returns to agricultural R&D have been on average in the range of 40-60% (Alston, et al 2000, Evenson 2001). Many agricultural economists see this high average as convincing evidence that there is significant underinvestment in public agricultural R&D (Ruttan 1980, Pinstrup-Andersen 2001). This paper sheds new light on the underinvestment hypothesis by introducing a simple model of the selection of R&D projects and confronting it with the rate-of-return evidence accumulated over the years worldwide. The model assumes that the distribution of all possible R&D projects on an expected rate-of-return (ERR) scale declines asymptotically. Under the neoclassical conditions of full information and profit maximization,... |
