The Analysis of the Effects of Domestic and Foreign Investment in R&D on Agricultural TFP in Iran

Nowadays, agricultural R&D provides new and developedtechnologies to create modern agricultural producingmethods. During recent years, improving agricultural productivityis affected by not only domestic R&D investments but alsoforeign countries R&D investments. Nowadays, according tonew growth models, R&D is the base of productivity. Recenteconomics theories consider agricultural research and it`s spillovers as important factors for technological change and economicgrowth. This paper investigates the amount of agricultural totalfactor productivity in Iran and analyzes the relationship betweenTFP, domestic agricultural research, and foreign agriculturalR&D during 1979 – 2008. In this study Iran`s partners are 20Asian, European and South American countries. The Solowresidual index approach is applied for the measurement of totalfactor productivity in agricultural sector of Iran. ARDL modelinvolving different lag length specifications were estimatedtaking TFP as a dependent variable. The results indicate thatagricultural researches (both domestic and foreign R&D) havepositive and significant impact on agricultural TFP. But theimpact of foreign R&D on agricultural productivity is strongerthan the effect of domestic R&D. According to gained resultsconsiderable portion of national product should be allocated toR&D costs and research budget of agricultural sector should beincreased to standard level. Also government should pay attentionto it`s partner countries because agricultural R&D spill over ofdeveloped countries is more than developing countries.