PRODUCTIVE AND PREDATORY PUBLIC POLICIES - RESEARCH EXPENDITURES AND PRODUCER SUBSIDIES IN AGRICULTURE

Governments are postulated to maximize a political preference function in choosing two policy instruments: research expenditures (a producti ve policy) that improve social welfare and production subsidies (a pre datory policy) that incur deadweight losses. Each policy affects the d istribution of income between producers and consumers. Governments det ermine the optimal mix of policies, taking into account interaction ef fects between research and subsidy expenditures. In addition to provid ing an explanation for underinvestment in research, the paper determin es conditions under which research and subsidy policies are complement ary. Such conditions are shown to characterize U.S. agriculture. Under investment in research is therefore less severe than in some other cou ntries.