The Economic Returns to U.s. Public Agricultural Research

We use newly constructed state-specific data to explore the implications of common modeling choices for measures of research returns. Our results indicate that state-to-state spillover effects are important, that the research and development lag is longer than many studies have allowed, and that misspecifi­ cation can give rise to significant biases. Across states, the average of the own-state benefit-cost ratios is 21:1, or 32:1 when the spillover benefits to other states are included. These ratios correspond to real internal rates of return of 9% or 10% per annum, much smaller than those typically reported in the literature, partly because we have corrected for a methodological flaw in computing rates of return.