Effects of Plant Variety Protection

New varieties of "self pollinated" crops have, in the past, been released by the public sector.  Self pollinated crops refer to those where farmers can save the seed after harvest, replant next year, and expect to have a new crop that is the same as the previous year (i.e., the "kids" are the same as the "parents").  Wheat is a staple crop that his both "self pollinated" and "inbred."

A lot of the research on wheat breeding has occurred in the public sector because of the belief that it would be difficult for private companies to recoup their investments when farmers can save their seed.  As a result, it is thought that private investment in wheat breeding would be "sub optimal" from a social welfare standpoint.

However, in recent years, a variety of changes have led to public and private companies being able to license new varieties and capture some of the benefits of the improvements in genetics.  Most controversial is the specter of GMO wheat, in which new varieties may have genes protected by intellectual property laws.  Unsurprisingly, some farmers and industry organizations don't like variety protection because it raises the cost of seed.  A cost that was previously borne by all taxpayers is now borne by the smaller group of farmers, millers, and bread consumers.  

A new paper in the American Journal of Agricultural Economics by Russell Thomson studies the effect of the introduction of new plant variety protection laws in Australia that allowed breeders to capture royalties on their new varieties. Thomson argues that the protection laws in Australia are "stronger" than in the US - giving breeders greater potential returns to their investments.

I have to admit that the findings are not what I would have expected.  Thomson writes: 

The results indicate that varieties released by royalty-funded breeders are less valuable than those released by breeders operating under the alternative, prereform regime. The data provide no evidence that the transition to royalty-funded breeding is associated with an increase in the rate of variety release. Taken together, these findings suggest that the reform led to a fall in breeder output relative to what would have otherwise been the case. This statistical analysis is supplemented with a series of semistructured interviews with senior scientists, who were employed at Australian breeding programs over the period of reform. This qualitative evidence suggests that the fall in breeder output was caused by a combination of fewer research spillovers, lower release standards, and a possible fall in total investment in breeding. Analysis presented in this article suggests that plant variety protection alone does not ensure socially optimal breeding outcomes in the case of open-pollinated varieties.

It is a little unclear whether this paper (which compares outcomes before and after a reform) is picking up the effect of the change in the law or some other secular trend.  Could it be the case that breeder output was falling everywhere even outside Australia (perhaps all the low hanging fruit had already been picked)?  The paper also doesn't tell us much (beyond anecdote) about whether total investment (public and private) in wheat breeding was steady or falling in real terms over this time period.  We also aren't told whether there were changes in how breeders who remained in the public sector were compensated after the law change.  Nonetheless, this is an interesting paper that should provoke more research in the area.