In recent years, much research has been done to assess the importance of research and development (R&D) and trade in influencing output growth and total factor productivity. There is now a large body of literature that provides theoretical and empirical models where cumulative R&D is the main engine of technological progress and productivity growth. The empirical evidence has been provided by Coe and Helpman in a seminal paper where they find that accumulated spending on R&D by a country and its trade partners helps to explain the growth of total factor productivity. R&D investments are still central to agricultural productivity growth. Alston et al., in the introduction of their recent book on the theme, underline that "Throughout the twentieth century, improvements in agricultural productivity have been closely linked to investments in agricultural R&D and to policies that affect agricultural R&D". Given the importance of agricultural R&D to sector growth, many works have been devoted to reporting measures of the returns to domestic agricultural R&D, but in a world where the international trade of agricultural products and the dissemination of knowledge are widespread, domestic agricultural productivity depends not only on domestic R&D but also on foreign R&D efforts. This point has been fully recognized by Hayami and Ruttan, who emphasized that a country can acquire substantial gains in agricultural productivity by borrowing advanced technology existing in other countries. Recent works analyze the effects of international public and/ or private agricultural R&D on domestic agricultural productivity growth, finding the presence of strong international spillovers in the agricultural sector and that, without recognizing knowledge spillovers, researchers will end with biased estimates of R&D elasticities. However, the international transfer of agricultural technology is more difficult than industrial technology. Modern agricultural technology has mainly been improved in developed countries located in temperate zones. Thus, without appropriate adaptive research that helps to assimilate and exploit externally available information, countries located in other ecological zones, for example tropical zones, may not benefit from technological spillovers. In the next section, we present a theoretical model that links total factor productivity to the cumulative spending on R&D. In the third section, we introduce and review the recent results on estimation and inference in panel co-integration. Co-integrating regression enables us to exploit the relationship among the variables in levels without transforming the data, such as by differencing, to avoid spurious regression problems. In section four, we estimate a simple Cobb-Douglas production function for a sample of 47 countries, during the period 1970-1992, by using panel co-integration. We also split the sample and estimate two production functions, one for the countries in the sample located in temperate zones, and one for the countries in the sample located in tropical zones. The results indicate that both production functions show constant returns to scale but factor elasticities are quite different. Using these results and following Coe and Helpman's empirical model, we are able to utilize panel co-integrating regression to estimate the relationship between total factor productivity and domestic as well as foreign R&D capital stocks. Using these estimates, we calculate the effect of change in a country's R&D spending on the change of total factor productivity in that country, as well as in partner countries. In summary, we find strong R&D spillovers between countries located in temperate zones and, inside this group, between EU countries. International spillovers are of less importance when analyzing tropical countries.

English

0310|AGRIS 0301|AL-Economics Program|R01PROCE

Juan Carlos Mendieta

CIMMYT Publications Collection