P 10 - 8 October 2010 InSTePP Paper 10 - 04 Revised : July 2011 Staff Paper Series 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 R&D lag is longer than many studies have allowed, and that misspecification 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 percent 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.