The returns to agricultural research in Maine: The case of a small northeastern experiment station

AgriculturalExperimentStationare presented.Estimatesare performedusingridge regression under an array of specifications,includingalternativefunctionalforms, lag structures,costs of mblic funds, and variablespecifications.Tbe resultsare consistentwith manypreviousresults that imply an undennvestmentin agriculturalresearch Federal and state budget expenditures have come under increasing pressure. As a result of this pres-sure, in many states, funds to carry on agricultural research at state agricultural experiment stations are experiencing increased scrutiny. It is sometimes argued that since the number of farms and agri-cultural acreage are declining (ignoring much greater increases in agricultural income and production), public funding of agricultural research should de-cline as well. In states like those of the Northeast, where ag-riculture’s share of the total economy has become relatively small, the pressure on public funding of agricultural research is particularly severe. The critical issue is, of course, not the growth or decline of the agricultural sector, but the rate of return to expenditures for public agricultural research. It has been argued for many years that there is significant underinvestment in agricultural re-search. This argument is based largely on many estimates of the rate of return to agricultural re-search that invariably show much higher returns than those that we observe in the private sector. Table 1 provides an overview of some of these estimates. There have been, however, a number of criticisms of such estimates. The criticisms focus on a number of issues, including accounting for extension activities, accounting for the effects of research expenditures from sources other than the aggregate considered, the appropriate length of time over which the research provides benefits, the ap