Brian D. Wright and Tiffany M. Shih (2010). NBER Working Paper 15793, March.

This paper investigates recent developments and challenges in agricultural innovation.

Agricultural innovation has led to impressive yield gains and lower food prices over the past century.  The rate of increase of the food supply has accommodated both individual consumption growth and population growth despite little expansion of cropland.  Public sector investment in basic research, particularly in developed countries, has been critical to these gains.  In this paper, Wright and Shih argue that in the development of new agricultural technologies, the public sector has “an important role in antitrust, the effective and efficient regulation of technologies, and in facilitating technology adoption” (2). 

Agricultural innovation in developed countries has been important because advancements “have spread around the globe with marginal social rates of return so high that they strain credulity” and because “Patterns of participation and technology exchange demonstrate high interdependence both between countries and along the public-private spectrum” (3).

Adaptive research has been important in applying agricultural innovations to different ecologies.  Localized research institutions and experiment stations create externalities across nearby environments.  This system was prevalent and successful in the United States, for example, up to the 1980s.  However, reforms giving greater intellectual property protection to agriculture beginning in the 1980s led to the growth of private agricultural investment, which now exceeds public investment.  The shift has not been entirely beneficial due to fragmented intellectual property claims impeding collaboration and further development.  However, the authors argue that one  lesson from the US case is “the importance of a large buildup of research capital stock though sustained investment” (8).

Globally, two-thirds of agricultural research spending comes from public and nonprofit sources and one-third from private sources.  Basic research tends to be dominated by the public sector and applied crop and technology innovations by the private sector.  Global public spending on agricultural research totalled $23 billion in 2000.  The developing countries crossed a milestone in the 1990s when their combined agricultural expenditures surpassed those of developed countries.  China, India, Brazil, South Africa, and Thailand are particularly significant developing country public investors in agricultural research, while the United States, Japan, France, and Germany lead the developed country pack. 

In terms of international organizations, the Consultative Group on International Agricultural Research (CGIAR) has been particularly effective in promoting agricultural innovations in developing countries, including, for example, high-yield semi-dwarf wheat varieties responsive to nitrogen fertilizer and cheap nitrogen fertilizer from natural gas.  The authors comment that these dual innovations “laid the basis for the Green Revolution in wheat in Mexico and Asia” (7).

Intellectual property has played an important and sometimes controversial role in agricultural innovation.  The authors conclude that in agriculture, “(1) IPRs have not strongly encouraged the private production of basic, essential research that is risky and often only pays off in the long run, (2) IPRs on key research inputs can impede freedom to operate in public research, and (3) IPRs on research inputs have led to market concentration and price markups, which should discourage or delay adoption” (34).  Despite these structural issues, the authors note that the leading private firms have been effective at disseminating commercial technology packages.  In terms of finding the most optimal innovation mix, the authors recommend further studies on “dynamically adaptive regulation” (34).