Agricultural R&D, Technological Agricultural R&D, - PowerPoint PPT Presentation

Agricultural R&D, Technological Agricultural R&D, Technological Change, and Food Security Change, and Food Security Julian M. Alston Julian M. Alston Department of Agricultural and Resource Economics Department of Agricultural and Resource Economics University of California, Davis University of California, Davis

Effects of Agricultural R&D Effects of Agricultural R&D For sure • more abundant, cheaper food • less poverty • a decrease in the number of people going hungry • a (perhaps smaller) decrease in the proportion of people going hungry And perhaps • more specialized and more intensive production on individual farms (and, for some, a greater risk of crop failure) • a greater use of purchased inputs (and, for some, a greater risk of financial ruin) • a faster rate of consumption of natural resource stocks • less biological diversity and an increased risk of widespread famine

Annual Growth in Agricultural Annual Growth in Agricultural Production, 1961-1997 Production, 1961-1997 Crop Livestock Total (percentage) Latin America and the Caribbean 2.61 2.85 2.71 Asia 3.01 4.93 3.50 Sub-Saharan Africa 2.09 2.35 2.16 Developing Countries 2.97 4.07 3.29 United States 1.98 1.23 1.61 Western Europe 1.08 1.43 1.27 Developed Countries 1.20 1.33 1.27 World 2.23 2.28 2.25

Agricultural Productivity Growth in Agricultural Productivity Growth in South China, 1976-1995 South China, 1976-1995 Crop Total MFP MFP Growth Due to R&D Growth (percent per annum) Rice 1.78 1.38 Wheat 4.54 2.82 Other Grain 4.29 3.58 Cash Crops 9.27 7.26

U.S. Wheat and Rice Yields, 1800-1996 U.S. Wheat and Rice Yields, 1800-1996 7000 6000 Revised Hatch 5000 Smith-Lever Bankhead- pounds per acre Act Jones Purnell Act 4000 Morill Land Grant 1955 Hatch Experimental College Act Station Act 3000 1925 1935 1914 2000 1887 1862 1000 0 1800 1869 1874 1879 1884 1889 1894 1899 1904 1909 1914 1919 1924 1929 1934 1939 1944 1949 1954 1959 1964 1969 1974 1979 1984 1989 1994 Wheat Rice

World Wheat Yields, 1960-1996 World Wheat Yields, 1960-1996 3.00 2.50 Yield (metric tons per hectare) 2.00 1.50 1.00 0.50 0.00 1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 Year

World Wheat Production, 1960-1996 World Wheat Production, 1960-1996 700,000 600,000 500,000 Thousand Metric Tons 400,000 300,000 200,000 100,000 0 1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 Year

U.S. Real Wheat and Rice Prices, 1899-1996 U.S. Real Wheat and Rice Prices, 1899-1996 (1994 US$) (1994 US$) 60 50 1994 dollars per 100 lb 40 30 20 10 0 1866 1871 1876 1881 1887 1892 1897 1902 1907 1912 1917 1922 1927 1932 1937 1942 1947 1952 1957 1962 1967 1972 1977 1982 1987 1992 Wheat Rice

Real World Food Price Index, 1959=100 Real World Food Price Index, 1959=100 200 180 160 140 120 100 80 60 40 20 0 1959 1961 1963 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997

World Food Price and per Capita Food Production World Food Price and per Capita Food Production 200 180 160 Index (1961=100) 140 120 100 80 60 40 20 0 1959 1961 1963 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 Food Price Food/capita

Effects of Eliminating Past R&D on Current Effects of Eliminating Past R&D on Current Grain Production and Prices Grain Production and Prices Past Patterns--over 35 years r q = dlnQ = 100% • p = dlnP = -50 % • g = q - ε p = 150 % ( ε = 1) • Assume η = - 0.2 and 2/3g = 100 % increase in supply r due to research, relative to 1960 Eliminate past growth in supply from R&D (reduce r supply by 50 % relative to 1995) q = - η (-50%)/( ε - η ) = -8% (-16% of 1960) • p = -(-50%)/( ε - η ) = 42% (25% of 1960) •

Distributional Considerations Distributional Considerations B i = - P i C i d ln P i + ( k i + d ln P i ) P i Q i > 0? r • consumers: - P i C i d ln P i > 0 • producers: ( k i + d ln P i ) P i Q > 0? B i = k i P i Q i + ( P i Q i – P i C i ) d ln P i > 0? r • adopters: k i P i Q i > 0 • deficit households: ( P i Q i – P i C i ) d ln P i > 0 • surplus households: ( P i Q i – P i C i ) d ln P i < 0 Households who produce a surplus and cannot adopt r are the only sure losers

Agricultural R&D and Household Income Agricultural R&D and Household Income Distributions Distributions frequency poverty line (b) (a) 0 (b) (a) annual income

IFPRI Projections: 1995-2020 IFPRI Projections: 1995-2020 world population will increase by 32% to 7.5 billion, r mostly in cities in developing countries per capita incomes will increase in all regions r 85% of total food demand growth will come from r developing countries demand for meat (and for grain for feeding livestock) r in developing world will double world grain production will have to increase 40 r percent (through yield improvement) food prices will remain steady or fall slightly r

Agricultural Research Investments: 1971 to 1991 Agricultural Research Investments: 1971 to 1991 Global public ag. R&D increased from $7.3 billion to $15 billion r In developing countries: from $3 billion to $8 billion r In developed countries: from $4.3 billion to $7 billion r ARIs in developed countries increased from $1.38 to $2.39 per r $100 of output ARIs in developing countries increased from $0.38 to $0.50 per r $100 of output Slower growth in the 1980s than the 1970s r Spending in IARCs grew rapidly in the 1970s, stalled in the r 1990s Relatively rapid growth of private agricultural research, in r developed countries, in particular areas

Public Agricultural R&D Spending: Public Agricultural R&D Spending: Global Perspectives, 1971 and 1991 Global Perspectives, 1971 and 1991 Australia, Netherlands, New Zealand, United Kingdom, & USA Other developed countries Developing countries 27% 32% 26% 20% 41% 54% 1971: 7.28 billion 1985 international dollars 1991: 14.95 billion 1985 international dollars

Public vs. Private R&D in OECD Countries Public vs. Private R&D in OECD Countries (1981-93 growth rates) (1981-93 growth rates) Greece Greece New Zealand New Zealand Belgium Belgium Ireland Ireland Canada Canada United Kingdom United Kingdom Australia Australia Germany Germany Austria Austria France France Netherlands Netherlands Average 5.0% pa Average 1.8% pa Switzerland Switzerland Japan Japan United States United States Sweden Sweden Denmark Denmark Finland Finland Norway Norway Italy Italy Portugal Portugal Spain Spain Iceland Iceland Continues to 32.0 0 0 0 0 0 0 0 0 0 0 0 0 10.0 12.0 14.0 16.0 -2.0 0.0 2.0 4.0 6.0 8.0 . . . . . . . . . . . . 3 2 1 0 1 2 3 4 5 6 7 8 - - - Private Public

Policy Issues Policy Issues How much total R&D? How much total R&D? r r Which types of R&D? Which types of R&D? r r Who should pay for it? Who should pay for it? r r Who should do it? Who should do it? r r What institutional arrangements? What institutional arrangements? r r What incentive mechanisms? What incentive mechanisms? r r

A Supply and Demand Model A Supply and Demand Model $ MSC = MPC + MSB MPB MSB 0 R 0 R R 1 R 2 Research (R) Food Security FS 2 FS 1 FS FS 0 0 R 0 R R 1 R 2 Research (R)

A Trade-off of Equity and Efficiency Using A Trade-off of Equity and Efficiency Using Research Policy Alone Research Policy Alone Equity (V) V MAX a b V* IC 0 BTC R c V MIN 0 E* E MAX Efficiency (E)

A Trade-off of Equity and Efficiency Using the A Trade-off of Equity and Efficiency Using the Least-Cost Policy Combination Least-Cost Policy Combination Equity (V) BTC* V** d BTC R IC 1 V* b IC 0 V MIN c e. 0 E* E** E MAX Efficiency (E)

Targeted versus Traditional Research Targeted versus Traditional Research Will “targeted” research be effective? r Will it yield smaller total benefits? r Will it yield greater food security (or other r distributional) benefits? Is “targeted” research the least-cost way of r achieving the food security (or other distributional) objective? Need a better understanding of technological r possibilities and consequences for different types if research