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Abstract
We use newly constructed data to model and measure agricultural productivity growth
and the returns to public agricultural research conducted in Uruguay over the period
1961–2010. We pay attention specifically to the role of levy-based funding under
INIA, which was established in 1990. Our results indicate that the creation of INIA
was associated with a revitalization of funding for agricultural R&D in Uruguay,
which spurred sustained growth in agricultural productivity during the past two decades
when productivity growth was stagnating in many other countries. The econometric
results were somewhat sensitive to specification choices. The preferred model
includes two other variables with common trends, a time-trend variable and a proxy
for private research impacts, as well as a variable representing the stock of public agricultural
knowledge that entailed a lag distribution with a peak impact at year 24 of the
25-year lag. It implies a marginal benefit-cost ratio of 48.2, using a real discount rate
of 5 per cent per annum and a modified internal rate of return of 24 per cent per
annum. The benefit-cost ratio varied significantly across models with different lag
structures or that omitted the trend or the private research variable, but across the
same models, the modified internal rate of return was very stable, ranging from 23 per
cent per annum to 27 per cent per annum. These results suggest that the revitalized
investment in research spending under INIA has been very profitable for Uruguay and
that a greater rate of investment would have been justified.