Previous NC 208 Research. The groups= activities were jointly determined at the outset and then divided amongst institutions to gain productivity through
comparative advantage for work on four objectives. A brief summing of key accomplishments and findings are presented:

Objective 1. To estimate the expected and actual flow of benefits and costs of research for agriculture, and related areas including the incidence of their
distribution.

Two new major state productivity data sets have been completed. First, cooperation among California-Davis, IFPR, and Minnesota led to a state-level, time-series
data set from 1949 through 1991 on inputs and outputs in U.S. agriculture have been compiled with adjustments for quality across states and over time, especially of
labor and capital inputs, and using state-level prices. They have also complied a major set of state public agricultural research expenditures. These data have been
used to analyze patterns of productivity and technical change in U.S. agriculture during the post-World War II period, and to compare the results from using
parametric, nonparametric, and index number approaches to measure both the rate of technical change, and its input and output bias.

Second, at ERS, the first official USDA state total productivity series for agriculture was completed in 2000, covering 1960-1996. The data set contains quantity
and price index for more than 20 outputs and 12 inputs, including quality adjustments. Also, a new state data set on public agricultural extension input, 1960-96 has
been constructed. These data sets provide a major resource to future agricultural productivity and research evaluation research. Several projects are being planned
to use these data sets.

Researchers working jointly at California-Davis, IFPRI, and Minnesota made major accomplishments dealing with methods for and actual research impact analyses
of crop varietal improvement globally. They published technical and popular reports from a global analysis of spillover benefits from Green Revolution varietal
research and change for rice and wheat, two major world food crops. Significant benefits were shown to accrue to the United States from varietal improvements in
rice and wheat through CIMMYT and IRRI research. More work remains in this area.

A comprehensive assessment of nearly 300 publications reporting over 1,800 rates of return to R&D were assembled into a meta-analysis using statistical techniques
to assess differences in reported rates of return across commodities, fields of research, countries, and time.

At California-Berkeley models of and empirical analysis of the management of genetic resources for agriculture and ex situ genebanks has been completed.
Advances in biotechnology offer the possibility of faster, cheaper, and more efficient evaluation methods. The research included a critical reassessment of the role of
the rapidly growing number of genebanks worldwide in the advancement of crop yields. The genebank research revealed that most U.S. crops have a rather narrow
genetic base, and currently use little new genetic material from international genebanks. Breeders prefer to draw on their own working stocks of enhanced
germplasm. However, the fixed cost of adding germplasm to a genebank is the primary cost, and once added, the marginal cost keeping it there is very low. Hence,
genebank diversity is relatively cheap relative to in situ conservation. In collaboration with IFPRI and CIMMYT, an interdisciplinary study of the costs of operating
the CIMMYT maize and wheat genebanks calculated the cost of endowing the facility in perpetuity. A similar study of the ICARDA genebank is under way.
Although a goals was to develop a methodology that could be employed by others, the practical experience has been that each genebank is enough different that the
required human capital investment is too high to generally train for genebank evaluation. One individual is largely leading all the genebank evaluation projects. A
related policy issue is the choice of the time to evaluate germplasm stored in genebanks. For a trait which has low probability of being needed soon, ex ante
evaluation tends to be dominated by delayed evaluation, which is especially useful information for underfunded genebanks.

At Iowa, work has been completed on the re-construction and extension of public agricultural research expenditure data over the period 1927-1996. The study
builds on earlier Huffman and Evenson (1993) efforts using CRIS data, 1970-96 and pre-CRIS data for 1927-1969. A subset of all CRIS commodities and
research problems areas associated with farm productivity were aggregated together for the SAES, veterinary medicine colleges, and ARS and ERS of the USDA.
The data set contains a total public agricultural research expenditure value and expenditure on more than twenty different research commodities. They have been
used to create new and improved state public agricultural research stock variables for new studies. Also, tests for convergence in state agricultural productivity levels
and growth rates found no evidence of convergence to a single level across all states and regional groups but convergence within regional groups, a type of
conditional convergence. The rate of convergence depends on public research spillovers, private R&D, and farmers= schooling. The findings imply that independent
state planning and national planning of agricultural research are inefficient. Also, a review and synthesis of the effects of education in agriculture concluded that
schooling of farmers in productive in agriculture largely through technically dynamic agriculture.

At Virginia, a study developed a new conceptual framework and methods for agricultural economics research evaluation. Information produced through social
science research obtains its value in part through reductions in uncertainty of outcomes. This information improves the ability of decision-makers to predict outcomes,
to evaluate uncertainty, and to take actions that reduce risk. The framework provides a means for addressing causality between conduct of economics research and
implementation of an institutional change or recommendation; appropriating credit when there are several pieces of research involved; and measuring the
contributions of social science research to multiple objectives. The significance of this evaluation work is that previous research evaluation efforts have focused
primarily on production research, making it difficult to compare benefits of different types in research programs that include social science research such as
agricultural economics.

Joint work at New Jersey (Rutgers) and ERS examined the impact of intellectual property rights and consolidation of the U.S. and European agricultural input
industries on private biotechnology research in the U.S. They also modeled the spread of biotechnology as part of an examination of impacts of regulations and IPRs,
including the transfer of Monsanto=s cotton Bt genes to China. Some empirical results have been developed from a survey of 300 cotton farmers in Northern China,
where cotton is grown.

At Auburn/Alabama, new studies showed the economic surplus distribution of the 1996 introduction of Bt cotton in the U.S. The analysis explicitly recognizes that
research protected by intellectual property rights generates monopoly profits to the owners of IP, and partitions these rents among consumers, farmers, and the
innovators. In the first of such studies, they showed that total world surplus due to Bt cotton increased by $240 million for 1996 and a similar magnitude for 1997. In
1996, the largest surplus share (59%) went to U.S. farmers, 26 percent to the gene developer (Monsanto) and germplasm supplier (Delta and Pine Land Company),
9 percent to U.S. consumers, and 6 percent to the rest of the world. The distribution of surplus for 1997 was similar, but Monsanto received a larger share and
farmers= a smaller share. This research has been highly cited in crop biotechnology research policy literature. In a related study, at Arizona, research tracked the
impacts of adopting Bt cotton throughout the United States. This study used a micro-parameter modeling approach to estimate impacts of Bt cotton adoption on
consumer benefits, cotton program outlays, and producer returns, by state and adoption status. The study is one of the first to estimate separate impacts on adopters
and non-adopters and to account for interactions between technological change and farm commodity programs.

At Idaho, a database was developed to evaluate the economic, environmental and social benefits of public research investments in the state agricultural experiment
station. The database is at the project level covering all research projects in the Idaho agricultural experiment station. To facilitate serving ad hoc information
requests, the research projects were indexed by commodities, counties, and legislative districts. The framework has potential for implementation in other states.

Also, other research estimated the economic and environmental impacts of nematode research and extension programs on the Idaho agricultural industry. The results
showed a benefit-cost ratio of 53 and more than 13 million pounds per year less of active toxic materials are used.

At Nebraska, adoption surveys were completed for technologies developed by research at Nebraska, including wheat varieties, wet gluten feeds,
chemigation/fertigation and eco-fallow rotations. A general equilibrium analysis of technological change revealed a novel alternative approach to measuring social
surplus generated by research-induced technological change. In addition results of an analysis of eleven alternative wheat breeding strategies for Nebraska suggested
that opportunities exist for substantial increases in returns to land and management for superior new technologies adapted to irrigated wheat production, including
organic production, in western Nebraska, and for eco-fallow systems in southern Nebraska.

At Florida, Georgia, Texas, and Missouri, state level technology impact studies where completed with methods developed in the project.

Objective 2. To determine and quantify the relationships between research and other public sector policies and programs for agriculture.

Joint research at California-Berkeley and IFPRI has examined the implications of using alternative intellectual property rights (IPRs) to protect crop genetic
improvements. IPRs are defined by national states and enforced by these nation states and international conventions or treaties dealing with international patent
convention. International conventions are adhered to largely by developed countries, but developing countries have borrowed freely from others without
compensation. The International Agricultural Research Centers are caught in the middle of the IPR debate. A study has been completed showing the welfare effects
of adopting (or not adopting) one of several available forms of intellectual property protection for the CGIAR system and NARs of the developing world.

A major piece of research has undertaken a unique dynamic approach to the economics of sequential patenting and other means of intellectual property (IP)
protection applied to genetic resources. IP rights have short- and long-term incentive effects that can have profound consequences for market-structure issues,
including public and private roles in agricultural R&D and the distribution of the gains and losses, especially in crop biotechnology where sequential patenting is
currently very important. A simple dynamic model of innovation has been developed and extended to cover the use of multi-generation patents in innovations over
the long term. Adding protected genes and other material or using protected processes to develop new material from CG or other genebank germplasm, changes
greatly the bargaining power and research incentives under different institutional structures.

These complex intellectual property right issues are the source of recent concerns about "freedom to operate" in the agricultural biotechnology industry by private
companies and others. The licensing issue lies at the core of the constraints and opportunities facing public-sector agencies and related agencies in an increasingly
proprietary area of science. An initial study was completed which examined the conceptual and practical aspects of the licensing arrangements surrounding
biotechnologies and the broader policy issues surrounding public-private contractual and other relationships.

At Virginia, research on evaluating integrated pest management (IPM) programs has developed a protocol for use by individual states and by USDA for economic
assessment of those programs. The protocol was successfully tested on sweet corn IPM. Methods for assessing the economic value of environmental benefits of
IPM were included. The significance of this work stems in part from the need to account for benefits of IPM related to external costs not accounted for in the
marketplace.

At, research tracked the adoption and diffusion of insect growth regulators (IGRs) in Arizona cotton production. In 1995, whiteflies in Arizona exhibited resistance
to commonly used insecticides. In some areas, growers made 8-12 applications, with costs ranging from $200-$300/acre. Despite high control costs, growers
received price discounts as high as 7-8 percent of gross revenues. In 1995, the University of Arizona, USDA’s Agricultural Research Service, the Arizona Cotton
Growers Association, and Cotton Incorporated undertook collaborative public-private research to gain EPA Section 18 exemptions to use IGRs. As a result of this
research, EPA granted exemptions in 1996. Through the use of GIS, cotton acreage data were overlaid on pesticide use data to construct a new database on
pesticide use intensity where each square mile of the state where cotton is grown is an observation. The number of observations range between 1,500-2,000 per
year. The database has been used to (a) trace IGR diffusion patterns, (b) explain adoption of IGRs, (c) estimate economic benefits on the new technology in terms of
reduced grower costs and environmental benefits in terms of reductions in overall insecticide use.

Also, an examination and summary of past biodiversity debates have been prepared, and implications derived for U.S. agriculture. Topics included are: intellectual
property rights, control over plant genetic resources (PGRs) in international gene banks, the international biosafety protocol regulating biotechnology, mechanisms to
finance PGR conservation and the allocation of funds in situ and ex situ conservation. Although PGRs are of importance to agriculture, they were not the primary
focus of the UN Convention on Biological Diversity when first drafted, management of PGRs has taken a prominent role in subsequent negotiations to implement the
Convention.

At ERS, research using a simultaneous endogenous growth model of biotechnology innovations, showed that for U.S. corn, cotton, potatoes and soybeans, an
inverse relationship exists between firm concentration in input seed markets and private R&D intensity in the particular market. As the concentrated of the industry
increases, the less intense R&D becomes, measured as the ratio of field trials to sales.

At New York/Cornell research examined the changing structure of agriculture and the changing role of land grant universities. The emergence of new forms of locally
oriented food and agricultural activities have been documented. The effects of federal and state research funding on these activities has been explored. It appears that
there are few, if any, returns from federal and state funding to consumers who seek a more localized food system.

At Texas, research and impact analyses were a major research focus. Evaluation was completed of technological improvements via LEPA and varietal improvements
as well as irrigation water management. LEPA was found to return more than 10 times its developmental costs. A set of new crop varieties was found to be an
effective way farmers can preserve their income position in the face of farm program elimination. Also, U.S.-based work was completed on the effects of both
avoiding and living with climate change.

Objective 3. To analyze decision strategies for agricultural research funding by different public institutions and private organizations.

First, Iowa and Maryland collaboration applied formal agency theory to the management and funding of agricultural research where scientists/agents differ in ability,
risk aversion, and opportunity cost. Explicit contracting on research output is impossible and implicit contracting under asymmetric information on scientists’ effort
leads to moral hazard problem. The optimal compensation plan is shown to consist of a salary guarantee and a share of the R&D payoff. A policy change that
increases research risk lowers scientists’ effort, the administrator’s expected research payoff, and scientists’ compensation. The study concluded that traditional
experiment station funding mechanisms parallel closely the characteristics of a socially efficient funding mechanism for attaining high value research payoff relative to
other mechanisms. Also, they have examined agricultural organizational changes and new financing prospects for the 21st century. Recommendations include: new
political jurisdictions look promising, e.g., new alliances across countries and subregions; and stronger intellectual property rights can increase private sector R&D
effort. Public-private partnerships can undermine the social rate of return to research if the private partner greatly distorts the allocation of public funds to research.
Additional work examined major changes in legislation--Government Reform and Results Act of 1993, 1996 Farm Bill, 1998 Agricultural Research, Extension, and
Education Reform Act-and concluded bureaucratic approaches to research accountability will prove ineffective because it overlooks unusual attributes of
research--large ex ante uncertainty of payoffs, long lags, and difficult incentive problems.

Collaborative work at California-Davis, IFPRI, and Minnesota resulted in a book dealing with a quantitative, comparative analysis of policies and institutional
innovations concerning agricultural R&D in a set of five OECD countries (Australia, New Zealand, United Kingdom, United States, the Netherlands)-as well as
more general information compiled for 22 OECD countries. The book summarizes many important issues in public agricultural research policy.

At Arizona, a research project estimated impacts econometrically of public research spending on private R&D spending in food and agricultural input industries.
Public research has a relatively larger impact on private R&D in the seed industry, followed by the agricultural chemical and veterinary pharmaceutical industries.
Public research has a positive, though smaller, impact on R&D conducted by the processed food and agricultural machinery industries.

At New York/Cornell work has continued analyzing the decision strategies for agricultural research funding by different public institutions and private organizations.
A model of "civic agriculture" has been developed that shifts the focus of agricultural research decision-making away from market-based institutions to
community-oriented groups. Research at Wisconsin, analyzed the 1996 survey of scientists in land grant universities to identify current sources of influence on
problem choice of agricultural scientists, and the extent of structuring of sustainable agriculture research in the land-grant system. Six different "content of research"
variables (productionist, sustainable, environmental, basic, consumer, and rural community/ development) were identified, and the antecedents of these six variables
were examined. Among the major findings are that variation across disciplines remain as important as in the 1979 Busch-Lacy study. AClient orientation@ of scientists
was the major predictor of a productionist and sustainable agriculture research emphasis, while client orientation was inversely related to the basic research
orientation of scientists. Contact with public interest organizations was associated with contact with private firms. Conventional/productionist and sustainable research
have a common emphasis on applied R&D.

The analysis showed a significant shift in the direction to more basic research over 1979 to 1996. Funding patterns have also changed significantly, for example,
while the share of formula funds in the typical agricultural/natural scientist’s research budget has declined, formula funds remain the single most important source of
funds. Private funding from all sources has remained stable. The most significant shift is the growing role of federal non-USDA competitive funds.

Objective 4. To continue the development of procedures for facilitating the priority setting process for agricultural research and to implement them in
individual states and nationally as requested.

Joint research at the California-Davis, IFPRI, and Minnesota developed a new, Windows version of a menu-driven, multimarket computer simulation package
(DREAM) released in both Spanish and English, along with a companion manual. The program can be used to estimate the economic consequences arising from the
local and spillover effects of R&D. The program is available through ISNAR.

At Idaho, major databases were revised and updated. Ten new files were added to show the impact of research on various sectors of the Idaho economy. A set of
survey questionnaires were developed to collect data for the extension database. The extension database consists of the following ten extension programs: (1) crop
extension; (2) animal extension; (3) 4-H; (4) youth programs other than 4-H; (5) family resource management and family relationships; (6) food safety; (7) nutrition;
(8) special programs including water quality, sustainable agriculture, and pesticide impact; (9) master gardener; and (10) rural and community development.

Joint research at Virginia, USDA, and other universities and at Michigan completed methods for research priority setting in agricultural economics and in developing
countries.

Renewal Project Objectives: The overall goal is to develop and test new social-economic models of R&D impact analysis, decision strategies for research, and
private-public linkages, and to communicate results to stakeholders. The project is to be organized around three objectives. The first objective is a combination of
objectives 1 and 2 and the second objective is a combination of the third and fourth objectives of the previous 5-year project. A new third objective is included.
They are:

Objective 1. To estimate the expected and actual flow of benefits and costs of research for agriculture, and related areas, including the incidence of their distribution.

Objective 2. To analyze decision strategies for funding, planning, managing, and evaluating agricultural research by public institutions and private organizations.

Objective 3. To analyze opportunities, risks, and net benefits from existing and potential public-private sector linkages, including new institutions (joint ventures,
partnering, consortia, specialty research centers, start-up companies, intellectual property), technology transfer

mechanisms (licensing, exchange arrangements, direct purchase, borrowing), and freedom to operate.