The Returns to Investment in Agricultural Research in Finland 1950—1984

Abstract

Abstract. This study attempts to estimate the value marginal product and the marginal internal rate of return for agricultural research in Finland. Based on production function analysis, different Cobb-Douglas and linear models are specified and estimated. A variable for the research input is measured through the flow of public expenditures for research and university-level education in . In addition, a stock of research capital consisting of funds accumulated since 1920 is constructed and included in the models. The estimates of elasticity with respect to public research are used to compute rates of return. State expenditures for extension agencies are also taken into account on the cost side.It is concluded that the stock of research capital estimates are more believable than the flow estimates, because of difficulties in identifying an appropriate lag. Based on the stock estimates, the value marginal product for public research during the period studied seems to have been 1.83-1.91. The conclusion implies that additional public investment in agricultural research would have annually returned by 183-191 % over the inflation rate. The marginal internal rate of return for public research is calculated to have been 20 -62 % depending on the length of the lag (4-10 years).Index words: Returns to research, value marginal product, agricultural research 257 258

Research on the agricultural economics in the 1970s and 1980s

“…Research on the fruitfulness of this work, measured according to economic indicators, is in the beginning. Pioneering work in this field was made by Sumelius (1987) in his doctoral dissertation, in which he concluded that the resources invested in agricultural research and extension services have yielded a fairly high percentage of returns, significantly higher than the percentage of returns that could be given by the resources invested in the production itself. Good results, of course, are not achieved by means of research alone.…”