Research investment and the economic returns to Chinese agricultural research

This article measures economic returns to research investment in Chinese ag riculture using the production function approach. A stock-of-knowledge vari able constructed from the past research investment is directly included in the production function as an explanatory variable in the production functi on. Improved rural infrastructure, irrigation, and education are also inclu ded as explanatory variables to avoid the upward bias in the estimates of r eturns to agricultural research. A two-way variable coefficients technique is used in the estimation to reduce estimation biases due to the remaining measurement and omitted variables problems. Sensitivity analyses are conduc ted to test the effects of various lag structures on the return estimates, The results show that rates of return to research investment in Chinese agr iculture are high, ranging from 36% to 90% in 1997, and the rates are incre asing over time.