Privatization, Public R&D Policy, and Private R&D Investment in China's Agriculture

Abstract

Private R&D is a major source of innovation and productivity growth in agriculture worldwide. This paper examines trends and determinants of agricultural R&D in China. Results show that while the public sector monopolized agricultural research until recently, private agricultural R&D has grown rapidly since 2000, driven largely by agribusiness privatization. Public-sector R&D investments in basic research also encouraged private R&D research, but public investments in technology development crowded out private R&D investment. China’s private R&D investment would grow more rapidly if the government shifted public resources from technology development to basic research.