Public and private roles in the financing and implementation of agricultural research

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Public and private roles in the financing and
implementation of agricultural research

• By Johannes Roseboom
• Consultant for the World Bank

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Introduction

• The public-private divide
• Theoretical perspectives
• Benchmarking some key indicators
• Linking benefit distribution to financing and
  implementation
• Recent institutional trends
• Some concluding observations

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The public-private divide
Public
Private
Benefit distribution
Financing
Implementing agency
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Theoretical arguments

• Market economy principle leave it to the market,
  only intervene when there is significant market
  failure in the provision of agricultural RD.
• When government intervention is deemed necessary
  and feasible, first look for ways to repair the
  market, second provide research funding, and only
  in last resort provide RD services directly.
• Training and basic research generally considered
  a public responsibility benefits undetermined
  ex ante.

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A decision tree for research policy
yes
yes
no
no
no
yes
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Reasons for market failure in RD

• Knowledge is a classic public good, once it is
  out it is difficult to exclude others using it.
• Hence private companies can only partially
  appropriate the benefits of their RD.
• This problem is particularly urgent in fragmented
  industries like agriculture and for innovations
  that are not embodied in a product.
• Uncertainty about research costs and benefits is
  often very high.
• By ignoring external costs, the private
  allocation of RD resources will be suboptimal.

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Benchmarking

• Theoretical arguments do not give concrete
  answers to the question of how much public
  intervention and funding is needed. This is an
  area where policymakers tend to turn to
  cross-country comparisons in order to get some
  guidance.
• However, some caution is needed averages of key
  indicators such as RD investment intensity and
  public-private shares do not represent optimal
  levels.

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Investment intensities and trends in public
agricultural RD
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Sources of funding per implementing agency
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Private agricultural and agriculture-related
research investment in developed countries
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The public-private divide
Public
Private
Benefit distribution
Financing
Implementing agency
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Benefit distribution

• Agricultural RD benefits are seldom exclusively
  public or private ? joint action and financing
  needed
• Benefits tend to be very fragmented over many
  producers and consumers
• Beneficiaries are often unaware of the fact that
  they benefit from research
• Hence the political lobby for public agricultural
  research is usually weak
• Linking benefits to financing Those who benefit
  should pay

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Financing
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Composition of public agricultural research by
implementing agency
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Institutional structure and financing

• The small share of private businesses in
  agricultural RD gives only a partial picture of
  the private sector effort
• The shift in research capacity towards
  universities and non-profit agencies represents a
  diversification of funding sources, including
  more private funding
• Also government research agencies are being
  pressured to become less dependent on public
  funding ? this may have a negative effect on
  their public good agenda

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Recent trends in LAC

• Trade treaties are restricting government
  intervention, except for ST
• Diversification of agricultural research funding
  sources, allocation mechanisms, and providers ?
  the need for overall coordination on the rise
• Steps towards greater efficiency in resource
  allocation through competitive funding schemes
• In addition to agriculture-specific competitive
  ST funds, general competitive ST funds are a
  growing source of finance for agricultural
  research

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Some concluding observations

• The public-private divide is a moving target
  which currently is moving towards the private
  end, but may very well shift back if
  circumstances change
• Most RD activities generate both public and
  private benefits ? public-private partnerships
  and corresponding financing instruments important
  (e.g., matching grant system)

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Muchas gracias