Recipient Organization
UNIV OF WISCONSIN
21 N PARK ST STE 6401
MADISON,WI 53715-1218
Performing Department
(N/A)
Non Technical Summary
The United States, a global agricultural leader, faces escalating challenges in the biotech crop era that threaten its international competitiveness and domestic sustainability related to market concentration, pest resistance and climate changes. This project aims to address these multifaceted issues by proposing and rigorously assessing potential policy solutions. We emphasize innovation, revisiting patent protection systems, and streamlining the supply chain as key elements of our strategy. We advocate policies promoting innovation in the seed market by simplifying regulatory approvals and offering financial support. We also consider implementing mandatory cross-licensing agreements, inspired by successful models in other industries (such as the pharmaceutical industry), to foster competition. In addition, we evaluate initiatives like the Open-Source Seed in encouraging the free exchange of seeds among stakeholders, backed by government protective policies. To achieve these objectives, we will construct a comprehensive dataset on seed market, productivity, innovation, pest infestation and resistance, weather and climate, and international trade, and adopt advanced economic analysis method to analyze farmer demand, firm supply, and firm innovation in the seed market. Our econometric analysis leverages proprietary datasets and public information, providing robust evidence to inform policymakers and engage the academic community. We address crucial aspects of the agricultural landscape and seek to secure the future success and global leadership of the U.S. agricultural sector.
Animal Health Component
40%
Research Effort Categories
Basic
30%
Applied
40%
Developmental
30%
Goals / Objectives
The main goal of this project is toidentify challenges that threaten the global competitiveness and sustainability of U.S. agriculture and propose methods to rigorously assess potential policy solutions. The US has been a global leader in agriculture, whose leadership position has been greatly bolstered by innovations in the area of agri-biotechnology, and their wide-spread adoption by farmers and input suppliers. Yet, internationally, the US faces growing competition from agriculturally prolific regions such as Brazil, Argentina, the European Union, and Australia.We have also witnessed a narrowing in the productivity gap between the U.S. and its main global competitors.Domestically, strong patent protection and market concentration in the seed and chemical inputs sector may discourage new players from entering the market and hinder follow-on innovations. In response to these challenges, this project aimed at exploring potential policies to address the multifaceted issues facing the U.S. agricultural sector. The overall goal is to address the urgent need for finding and assessing quantitatively the effectiveness of proposed solutions to such challenges to maintain the global competitiveness and sustainability of U.S. agriculture.To meet this goal, we havedevelopedthree objectives.Objective 1 is to construct a comprehensive dataset to study innovation, IPR protection, technology adoption, climate impact, and pest resistance management for selected field crops: corn and soybean.Based on these datasets, we will document important trends such as innovation speed and market concentration, risk distribution and option value related to pest and/or climate change, and yield distribution across regions and over time.-Objective 2 is to quantify the impacts of new technology on agricultural production, farmer welfare, seed industry profits, international trade, and adaptations to environmental change. We will quantify the benefits of new technologies that strengthen the US agricultural sector against climate change and other future challenges and evaluate the distribution of such benefits among stakeholders. We will assess the roles of farmers and seed companies in managing pest resistance and compliance with refuge requirements.-Objective 3 is to propose and evaluate policy solutions to promote innovation and technology diffusion and ensure the viability of existing technologies over the long run, with a view towards maintaining the competitiveness of U.S. agriculture. We will evaluate policies that promote innovation and entry into the seed market, as well as those ensure the viability of existing technologies over the long run.
Project Methods
For objective 1, wewill compile a comprehensive dataset on U.S. corn and soybean seed market, innovation, pest infestation and resistance, corn and soybean productivity, climate and weather, and international trade, using both proprietary data and public sourced information.For each data set we compiled, we will document data trends on important characteristics such as seed market concentration, innovation speed, risk and option value of biotech traits, and yield distribution across regions and over time. Pulling insights from these datasets together will provide a comprehensive evaluation of the challenges and opportunities faced by U.S. agriculture.For objective 2, we will construct astructural econometric model of an oligopolistic market consistingof (a) a demand system; (b) firms' static cost functions and, in some cases, their cost of investment into production assets and R&D; (c) a definition of firms' strategic variables (typically price or quantity) and the equilibrium concept (e.g., static Nash equilibrium in prices).The structural econometric model used in our project will extend the existing literature by incorporating the following aspects: (1) we allow seed companies' product lineup to be formed endogenously through the development of new varieties and the discontinuation of older ones; (2) we allow seed companies to be engaged in dynamic competition wherein decisions on R&D investments and product continuation are made to maximize the discounted flow of future profits while taking into account rivals' actions; (3) we allow for the possibility that farmers take into consideration the impact of their seed variety choice (in particular, the decision on how much refuge crop to grow) on pest resistance in their vicinity, not only on their own plots. We willemploy advanced econometric techniques such as the generalized method of moments and simulation methods. In addition, some of the parameters - such as those pertaining to R&D costs and the cost of product continuation - are unlikely to be point-identified. This requires us to employ recently developed methods of partial identification. We will also adopt other appropriate econometric approaches to account for potential data limitations.For objective 3, we will conduct counterfactual simulations using the structural econometric model from objective 2. By simulating a counterfactual scenario where a hypothetical policy package has been implemented, or a new technology has become widely available, researchers can predict the impact of those changes on market outcomes and economic welfare (defined to include not only consumer surplus and producer surplus, but also external environmental costs). We will then use the counterfactual simulation results to evaluate policy options. Our analyses will quantify various effects such as the benefits to farmers as well as the profits accruing to seed companies and provide guidance to policymakers and researchers on the type and amount of assistance that the US government could provide to support the development of new technologies.