MARKET DISTORTIONS AND TECHNOLOGICAL-PROGRESS IN AGRICULTURE

It is widely believed that price policies have contributed to low rate s of productivity growth in agriculture, but there has been little pro gress to date in work on the relationship between price distortions an d agricultural productivity or agricultural research. Given the import ance of technological change in agriculture, it is important to know w hether price policies impede investments in R&D and productivity growt h. In this article, a theoretical analysis indicates that the effects of commodity price policies on incentives of government and industry t o invest in agricultural research are ambiguous. While the resullts su ggest a general tendency of policies that protect producers to encoura ge greater research investments, the opposite result cannot be ruled o ut. A statistical model using international, cross-sectional, time-ser ies data shows that agricultural research investments are significantl y correlated, but negatively, with rates of producer protection. The i mplication is that some factor other than price policy is responsible for both the low rates of public-sector investments in agricultural re search worldwide, and the low rates of productivity growth in less-dev eloped countries. Research administrators in more- and less-developed countries alike typically consider a multiplicity of goals when settin g research priorities and research budgets. Therefore, an alternative explanation of low agricultural productivity and underinvestment in ag ricultural research may be that public-sector research policy has been misguided.