CAN PRICE SUPPORTS NEGATE THE SOCIAL GAINS FROM PUBLIC RESEARCH EXPENDITURES IN AGRICULTURE?
de Gorter, Harry; Swinnen, Johan F.M.
The burgeoning literature on how the benefits from research may be negative for a given price support arbitrarily ignores the costs of price supports for a given level of research. Furthermore, the very existence of price supports is inconsistent with the normative criterion that governments simply maximize social income. We show that there are always gains from research, even if governments maximize social income subject to a farm income goal. Our results are also consistent with the statements made by Schultz and Ruttan that ignoring price supports will result in all over (or under) valuation of research benefits. Finally, we indicate that the predictions of the no gains from research literature may not be substantiated by empirical evidence and that the ideal normative model should include endogenous farm income levels as well.
WP 1994-06 June 1994
Charles H. Dyson School of Applied Economics and Management, Cornell University