A Long Run Profit Function and a Review of the Returns to R&D

SOUTH AFRICAN AGRICULTURE AT THE CROSSROADS: AN EMPIRICAL ANALYSIS OF EFFICIENCY, TECHNOLOGY AND PRODUCTIVITY, London: Macmillan Press Ltd., and New York: St. Martin’s Press, LLC, 2000

14 Pages Posted: 14 Apr 2011 Last revised: 17 Nov 2015

See all articles by Carlos Arnade

Carlos Arnade

U.S. Department of Agriculture (USDA) - Economic Research Service (ERS) - Market & Trade Economics Division

Yougesh Khatri

International Monetary Fund (IMF)

David Schimmelpfennig

Science & Technology PPQ; Economic Research Service (ERS); USDA Economic Research Service

Colin Thirtle

Imperial College London - TH Huxley School of Environment, Earth Sciences & Engineering; University of Pretoria - Department of Agricultural Economics, Extension and Rural Development

Johan van Zyl

University of Pretoria; World Bank

Date Written: April 8, 2000

Abstract

This chapter extends the work of the previous chapters by fitting a long run profit function to investigate the sources of output growth in South African agriculture. In the long run, all the conventional inputs are treated as variable, but the technology-related variables are fixed because they are beyond the control of farmers. The long run elasticities are entirely consistent with the short run results and are easier to interpret. However, education still has negative effects and the rate of return to public R&D is 113 per cent, as compared with the short run result of 44 per cent. The higher return reflects the fact that new technology is embodied in the capital items, but the long run model raises a new problem since the last chapter showed that capital stock adjustment takes 11 years. If this is assumed to be the correct lag length, the long-run ROR falls to a more reasonable 58 per cent.

Suggested Citation

Arnade, Carlos and Khatri, Yougesh and Schimmelpfennig, David and Thirtle, Colin and van Zyl, Johan, A Long Run Profit Function and a Review of the Returns to R&D (April 8, 2000). SOUTH AFRICAN AGRICULTURE AT THE CROSSROADS: AN EMPIRICAL ANALYSIS OF EFFICIENCY, TECHNOLOGY AND PRODUCTIVITY, London: Macmillan Press Ltd., and New York: St. Martin’s Press, LLC, 2000, Available at SSRN: https://ssrn.com/abstract=1805704

Carlos Arnade

U.S. Department of Agriculture (USDA) - Economic Research Service (ERS) - Market & Trade Economics Division ( email )

Washington, DC
United States

Yougesh Khatri

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

David Schimmelpfennig (Contact Author)

Science & Technology PPQ ( email )

4700 River Road
Riverdale, MD 20737
United States
301-851-2324 (Phone)

Economic Research Service (ERS) ( email )

355 E Street, SW
Washington, DC 20024-3221
United States
202-694-5507 (Phone)

USDA Economic Research Service ( email )

355 E Street SW
Washington, DC 20024-3221
United States

Colin Thirtle

Imperial College London - TH Huxley School of Environment, Earth Sciences & Engineering ( email )

Prince Consort Road
London, SW7 2BP
United Kingdom

University of Pretoria - Department of Agricultural Economics, Extension and Rural Development

Pretoria 0002
South Africa

Johan Van Zyl

University of Pretoria ( email )

Physical Address Economic and Management Sciences
Pretoria, Gauteng 0002
South Africa

World Bank

1818 H Street, N.W.
Washington, DC 20433
United States

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