COINTEGRATION, AND CAUSALITY - EXPLORING THE RELATIONSHIP BETWEEN AGRICULTURAL RESEARCH-AND-DEVELOPMENT AND PRODUCTIVITY

This study investigates the causal relationships between total factor productivity (TFP) and explanatory variables, such as public sector ag ricultural R&D, extension, farmer education, private sector patents an d the weather. Cointegration and Granger causality tests are applied t o the UK data which were used by Hallam (1990). Unlike Hallam, we find that there is a relationship between research spending and productivi ty. The same methodology is applied to new data for ten EC countries a nd the USA. In all cases there is evidence of a long run relationship between TFP and R&D. Pooling the data for the ten EC countries and the USA, and then testing for causality shows that R&D expenditures are G ranger prior to TFP and that TFP is also Granger prior to R&D expendit ures. This result agrees with Pardey and Craig's (1989) US study.