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The Induced Innovation Hypothesis and U.S. Public Agricultural Research
Author(s) -
Cowan Benjamin W.,
Lee Daegoon,
Shumway C. Richard
Publication year - 2015
Publication title -
american journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.949
H-Index - 111
eISSN - 1467-8276
pISSN - 0002-9092
DOI - 10.1093/ajae/aau090
Subject(s) - induced innovation , agriculture , economics , panel data , control (management) , production (economics) , public sector , agricultural productivity , public economics , agricultural economics , technological change , industrial organization , microeconomics , econometrics , economy , macroeconomics , management , biology , ecology
Applicability of the induced innovation hypothesis—that a change in relative input prices induces innovation to economize use of the increasingly expensive input (Hicks 1932)—is examined for U.S. public agricultural research. A reduced‐form test is developed using input prices from the agricultural production sector, expenditures from the public research sector aimed at developing new technology to save specific agricultural inputs, and variables to control for innovation marginal cost differences and nonhomotheticity. Unlike recent demand‐side studies that soundly reject the induced innovation hypothesis for agriculture, support for the hypothesis is found for several input pairings through these tests of public agricultural research using state‐level panel data.