Huffman, Wallace E.; Fan, Xing; Schuring, Jessica

WP #10021, April 2010

The objective of this paper is to identify the impact of public and private agricultural

research on multi-output multi-input profit maximizing decisions of Midwestern farmers. The main

hypothesis is that investments in public and private R&D shift outward the supply curves for crop

and livestock outputs and, in some cases, reduce the demand for inputs. The study uses state

aggregate data for eight Midwestern states over 1960-2004. The own-price elasticities of demand for

all inputs are shown to be negative, being larger for agricultural chemicals and energy that for farm

capital services, labor and other materials. Additional public agricultural research increases the

supply of crop and livestock outputs but biases revenue shares toward crop output. Additional

private R&D as in adoption of GM corn varieties shifts outward the supply curves for crops and

livestock outputs but biases revenue shares towards crop output. In contrast, an increase in the

adoption of GM soybean varieties increases livestock output and deceases crop output. Public

agricultural research reduces the demand for capital services and energy and increases the demand

for agricultural chemicals, other materials, and labor. An increase in the availability of GM soybean

varieties increases the demand for capital services, agricultural chemicals and other materials and

has weak negative effects on the demand for labor and energy. GM corn variety adoption reduces

the demand for energy but other effects are quite small.

Keywords: Profit function, midwest agriculture, public research, technology, GMOs, multiple-inputs multiple output, crops

Full Text