Simulating the spillover benefits from R&D by a small producer country embedded in a network: aquaculture R&D in Germany Stefan Guettler Linda Seidel-Lass Rolf A.E. Mueller Department of Agricultural Economics Christian-Albrechts-University at Kiel, Germany EAAE 2011 Zurich
Introduction: World finfish production World capture and aquaculture production of Continents share finfish, 1950 – 2009 [mio. t] of aquaculture finfish production quantity 2009: Asia: ~ 88% Europe: ~ 5% Americas: ~ 4% Africa: ~ 3% EU-27: ~ 1.7% EU-15: ~ 1.5% Source: FAO (2011) 2 EAAE 2011 Zurich
Introduction: EU-15 Development of EU-15 supply and How to increase aquaculture demand of finfish, 1961 - 2007 production of fish in EU-15? 8 resource-based growth strategy • 7 R&D • Finfish [mio. t] 6 R&D in aquaculture relatively young compared to 5 • R&D on poultry, pigs, or cattle 4 highly diversified (fish species • 1961 1966 1971 1976 1981 1986 1991 1996 2001 2006 and production systems) Year transforming wild fish into • Demand Supply domesticated fish Source: FAO (2010) Goal: analyze EU-15-wide transforming common property • economic impact of R&D to private property conducted by a single country 3 EAAE 2011 Zurich
Pyramid of knowledge and spill-overs Rest of EU-15 Germany Science R & D Science R & D Production Production Consumption Consumption 4 EAAE 2011 Zurich
Spillovers in aquaculture research Co-author relationships in aquaculture and fisheries research in EU-27, 2005 increase in Co-Author Relationships 2005 scientific National Publications EU-27 Publications Number of Relationships Relationships weak aquaculture medium strong and fisheries EU-27 countries publications: 1990 – 1994: 1,751 publications 2000 – 2005: 8,634 publications Source: Seidel-Lass (2009) Source: Seidel-Lass et al. (2008) 5 EAAE 2011 Zurich
Economic effects of aquaculture-R&D Germany Rest of EU-15 Spill-over ( θ ij ) S 1 S * 1 S * 2 = S * 1 – (k i θ ij ) p* p 0 ≤ θ ij ≤ 1 R&D R&D S 2 = S 1 - k i p* 1 p 1 p 2 p* 2 R&D-induced D benefits D* q q 1 q 2 q* 1 q* 2 q* 6 EAAE 2011 Zurich
Spillover-coefficients in aquaculture R&D Co-author relationships in aquaculture and fisheries Spillover-coefficients research in EU-27, 2005 ( θ ij ) based on co- author relationships Germany Austria 0.125 Belgium 0.125 Denmark 0.250 Finland 0 France 0 Germany - Greece 0.250 Ireland 0 x ij : number of collaborations in aquaculture and Italy 0 fisheries research publications between Netherlands 0.250 country i and j Portugal 0.125 θ ij : spillover coefficient between country i and j Spain 0 𝑦 𝑗𝑘 𝜄 𝑗𝑘 = Sweden 0 max 𝑦 .. UK 0.375 7 EAAE 2011 Zurich
Simulation - setup Assumptions: market for aquaculture finfish in EU-15 countries • no international trade • no spill-overs beyond the EU • no substitutes, no externalities • no upstream or downstream markets • Base data and parameterization: supply, demand and price based on EU-15 market characteristics • supply and demand elasticity ( ɛ) set to 1 • per unit cost reduction rate (k) of 20% (single fixed shift) • costs for R&D are set to zero • real discount rate: 3% • simulation period: 2010 – 2030 • 8 EAAE 2011 Zurich
Scenarios Research and adoption lags Scenario 1: base scenario R&D conducted in Germany • no spillovers • research lag ( λ R ): 4 years • adoption lag ( λ A ): 4 years • Scenario 2: base scenario with spillovers According to Alston et al. (1995) spillovers according to co-author relationship • transfer to and adoption of new technology in spill-in countries • Scenario 3: base scenario with lagged spillovers spillover lag: 3 years • Simulation with DREAM (IFPRI) 9 EAAE 2011 Zurich
Results Net present value of producer and consumer surplus of scenarios 1-3 [in mio. US$] Scenario 1 Scenario 2 Scenario 3 Country Producer Consumer Total Producer Consumer Total Producer Consumer Total Germany 363 24 387 352 89 441 355 74 428 Spill-in -29 56 28 869 204 1,073 666 172 837 countries No-spill-in -19 92 73 -70 333 263 -59 279 220 countries Total NPV 315 173 488 1,151 626 1,778 962 524 1,486 Benefits S1: German gains in producer surplus exceed losses of rest of EU-15 S2: spillovers boosts total surplus S3: lagged spillovers dampen total surplus Total NPV benefits could be interpreted as the maximum costs a R&D- project could have today to be profitable. 10 EAAE 2011 Zurich
Sensitivity of results Sensitivity of NPV benefits to changes in adoption and research lag � � � A S2 A S1 A S3 � � � R S1 R S2 R S3 Total NPV of benefits react much more sensitive to changes in the research lag ( λ R ) than in the adoption lag ( λ A ). 11 EAAE 2011 Zurich
Discussion • R&D with spill-overs boosts economic surplus, even when home production is weak • returns to R&D more sensitive to research lag ( λ R ) than to adoption lag ( λ A ) • policy implications • funding of R&D-projects: location of R&D does not matter as long as knowledge spillover occur • accelerate R&D, do not focus solely on adoption process 12 EAAE 2011 Zurich
Future research • areas for improvement • estimates of parameter values : ɛ, k, θ , etc. • functional forms of supply and demand curves • domestic and cross-border adoption lags • R&D spill-overs to other aquaculture species • path-impact of current R&D on future R&D 13 EAAE 2011 Zurich
Thank You! Stefan Guettler Linda Seidel-Lass Rolf A.E. Mueller Department of Agricultural Economics Christian-Albrechts-University at Kiel, Germany stefan.guettler@ae.uni-kiel.de http://www.agric-econ.uni-kiel.de/Abteilungen/II
Backup 1: Country-to-country collaborations 15 EAAE 2011 Zurich
Backup 2: Evolution & Domestication Land versus water . Most land species were • domesticated earlier than aquatic species, but in the past 100 years, • many more aquatic species than land species have been domesticated. Duarte et al. 2007 16 EAAE 2011 Zurich
Backup 3: EU-15 Aquaculture production Development of EU-15 aquaculture production (1970 – 2008) � � � � 2008 1970 (1970-2008) t % EU-15 % World t % EU-15 % World Spain 249,062 21.2 0.47 156,200 37.4 6.09 59 France 237,833 20.2 0.45 106,444 25.5 4.15 123 Italy 181,469 15.4 0.35 28,632 6.9 1.12 534 United Kingdom 179,187 15.2 0.34 444 0.1 0.02 40,257 Greece 114,888 9.8 0.22 1,040 0.2 0.04 10,947 Ireland 57,210 4.9 0.11 3,701 0.9 0.14 1,446 Netherlands 46,622 4.0 0.09 86,000 20.6 3.35 -46 Germany 43,977 3.7 0.08 23,477 5.6 0.91 87 Denmark 35,337 3.0 0.07 9,272 2.2 0.36 281 Finland 13,439 1.1 0.03 999 0.2 0.04 1,245 Sweden 7,595 0.6 0.01 373 0.1 0.01 1,936 Portugal 6,458 0.5 0.01 47 0.0 0.00 13,640 Austria 2,087 0.2 0.00 870 0.2 0.03 140 Belgium 126 0.0 0.00 0 0.0 0.00 Luxembourg - - - - - - EU-15 1,175,290 100.0 2.24 417,499 100.0 16.26 182 World 52,546,205 2,566,882 1,947 (1): Fish, crustaceans, mollusks, etc; not aquatic plants. Source: FAO (2008), own calculations 17 EAAE 2011 Zurich
Backup 4: Initial market characteristics Base data for DREAM-Simulation: EU-15 market for finfish from aquaculture exogenous growth Elasticity Country Supply Demand Price of demand (1,000 t) (1,000 t) (1,000 US$/t) Supply Demand (p.a. in %) Austria 2.5 20.5 5.70 1.0 1.0 0.90 Belgium 0.2 42.7 4.18 1.0 1.0 1.11 Denmark 35.2 20.5 3.42 1.0 1.0 0.57 Finland 13.4 39.0 4.66 1.0 1.0 1.47 France 49.5 321.8 3.94 1.0 1.0 0.78 Germany 33.7 254.7 4.56 1.0 1.0 0.31 Greece 85.4 40.6 5.42 1.0 1.0 1.83 Ireland 13.1 15.0 5.62 1.0 1.0 2.39 Italy 51.7 207.9 5.14 1.0 1.0 0.06 Netherlands 9.7 70.8 5.60 1.0 1.0 0.74 Portugal 4.3 116.9 6.12 1.0 1.0 0.04 Spain 58.8 279.6 4.36 1.0 1.0 0.90 Sweden 4.9 47.4 4.55 1.0 1.0 1.38 UK 145.6 227.0 4.97 1.0 1.0 1.37 *ROW 1,196.2 - 4.79 1.0 - - Source: FAO (2008); FAO (2009b); OECD (2009); S EALE et al. (2003), own calculations 18 EAAE 2011 Zurich
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