The objective of this paper is to disentangle the question of the influence of R&D investment on resource allocation efficiency and income distribution in Japanese agriculture during 1960-87. The average marginal product of R&D stock as estimated by the cost function approach is calculated to be 4.47 at 1985 prices and 1.84 at current prices, and the internal rates of returns are 45.6 percent and 33.9 percent. In spite of their high profit-earning efficiency, they have drawn near to the profitability criterion, the current interest rate. Although technical progress induced by R&D activities increases social welfare without fail, its distribution among customers and producers depends, to a large extent, on market circumstances. The empirical results suggest that consumer and producer economic surpluses have collided with respect to the allocation of R&D investment.


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