Producer-Funded Innovation: R&D Spillovers across Levy Programs

Agricultural R&D investment is becoming an increasingly important policy issue as food prices push upwards and food security problems emerge. An important source of agricultural R&D funding is from producer check-offs, which are increasingly being used to fund applied agricultural research. Existing studies of producer-funded agricultural R&D indicate that there are high private and social rates of return to agricultural R&D investment by farmers, and thus that farmers are under investing in R&D. An important reason for underinvestment of producer-funded R&D is the spillovers across levy programs – the research benefits of one particular crop can flow to other crops via spillovers. The spillovers across levy programs are particularly important in jurisdictions, such as Canada, where agricultural R&D activity has been organized on a commodity-by-commodity basis. This study developed a theoretical model to capture farmers R&D investment decisions by explicitly specifying spillovers across levy programs