Marginal Productivity of Public Research in the Softwood Plywood Industry: A Dual Approach

Abstract

The production function approach commonly used in agricultural studies is modified to estimate returns from publicly funded forestry research. The method indirectly estimates production function coefficients using a simultaneous, constrained supply and demand system. From these estimates the value of the marginal product (VMP) of public research involving softwood plywood is used to calculate a marginal internal rate of return (MIRR) on publicly funded research. Whereas similar studies in the agricultural literature use a short-run VMP based solely on the initial impact of R&D, we develop a long-run VMP, which incorporates research impacts over time. A short-run VMP is also defined, however, and compared to the results reported in the agricultural literature. Estimates of the short-run VMP for softwood plywood are similar to other aggregate research cases, such as corn and poultry. The estimated long-run VMP, however, is large; the most conservative assumptions yield an estimated VMP of public research in softwood plywood of $33.11 in 1967 dollars. The MIRR is also large with a lower estimate of 236%. For. Sci. 33(4):872-888.