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 research and development 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% 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.