The calculation of returns to research in distorted markets : comment
Document Type
Journal article
Source Publication
Agricultural Economics
Publication Date
1-1-1991
Volume
5
Issue
1
First Page
75
Last Page
82
Publisher
Elsevier
Abstract
In a recent article, Oehmke reported that a high internal rate of return for investment in research when the interaction between research and price policy costs was disregarded could become very low or even negative when the effects of research on the costs of price policy were considered. In this paper, the social returns from research in the presence of the price policies considered by Oehmke are reexamined using a simple geometric approach. The analysis suggests that an output subsidy in a small importing economy, an output subsidy in a closed economy, and a target price in a large exporting economy will — on Oehmke's assumptions — cause only small reductions in the internal rate of return from investment in research. This implies that the apparent underinvestment by governments in agricultural research cannot be explained away by a large upward bias, known to governments, in measured rates of return due to failure to account for interactions between research and the costs of price policy measures.
DOI
10.1016/0169-5150(91)90037-L
Print ISSN
01695150
E-ISSN
15740862
Publisher Statement
Copyright © 1991 Elsevier Science B.V. All rights reserved. Access to external full text or publisher's version may require subscription.
Full-text Version
Publisher’s Version
Language
English
Recommended Citation
Voon, J. P., & Edwards, G. W. (1991). The calculation of returns to research in distorted markets: Comment. Agricultural Economics, 5(1), 75-82. doi: 10.1016/0169-5150(91)90037-L