Understanding the World Wool Market: Trade, Productivity and Grower Incomes. Part 5: Relative Returns to Australian Wool Producers of On- and Off-Farm Research

This is Chapter 5 of my PhD thesis Understanding the World Wool Market: Trade, Productivity and Grower Incomes, UWA, 2006. The full thesis is available as Discussion Papers 06.19 to 06.24. Here we apply WOOLGEM (the model outlined in Chapter 4) to analyse the effects of on- and off-farm research (and development) leading to productivity improvements in the multistage wool production system. In doing so, we focus on the relative returns to Australian wool producers of on- and off-farm research. The research question is motivated by the continued existence of significant wool industry levies used to fund, inter alia, research at different stages of the Australian wool production system. The levies amount to two per cent of revenue from sales of greasy wool and are used to fund both on and off-farm research (AWIL 2005). For the Australian wool industry, investing the levies on research in the production stage that provides the largest benefit to farmers is crucial for farm profitability in both the short and long term