Impacts of Agricultural Research and Extension

About a month ago, I posted on some new research suggesting decline rates of productivity growth in agriculture.  Last week at a conference in Amsterdam, I ran into Wally Huffman from Iowa State University, and knowing he's done work in this area, I asked him if he had any thoughts on the issue.  As it turns out, along with Yu Jin he has a new paper forthcoming in the journal Agricultural Economics on agricultural productivity and the impacts of state and federal spending on agricultural research and extension.  

Jin and Huffman also find evidence of a slowdown in productivity growth, writing: 

We find a strong impact of trended factors on state agricultural productivity of 1.1 percent per year. The most likely reason is continued strong growth in private agricultural R&D investments. The size and strength of this trend makes it unlikely for average annual TFP growth for the U.S. as a whole to become negative in the near future. However, for two-thirds of the states, the forecast of the mean ln(TFP) over 2004-2010 is less than trend. The primary reason is under-investment in public agricultural research and extension in the past. For public agricultural research where the lags are long, it will be impossible for these states to exceed the trend rate of growth for TFP in the near future.

They also find large returns to spending on agricultural research, and even larger returns to spending on extension.  They find the following:

For public agricultural research with a productivity focus the estimated real [internal rate of return] is 67%, and for narrowly defined agricultural and natural resource extension is over 100%. Stated another way, these public investment project could pay a very high interest rate (66% for agricultural research and 100% for extension) and still have a positive net present value. Hence, these [internal rate of return] estimates are quite large relative to alternative public investments in programs of education and health. In addition, there is no evidence of a low returns to public agricultural extension in the U.S., or that public funds should be shifted from public agricultural extension to agricultural research. In fact, if any shifting were to be recommended, it would be to shift some funds from public agricultural research to extension.

The paper includes a couple really interesting graphs on research spending and extension employment over time.  First, they show that for four major agricultural states, real spending on agricultural research peaked in the mid 1990s. 

And, while extension staff has declined in some states, it hasn't in others.