OPTIMAL RESEARCH, INDUCED INNOVATION, AND AGRICULTURAL DEVELOPMENT: AN APPLICATION TO BANGLADESH

The literature of development economics is marked with an interesting rhythm. In the fifties it regarded agricultural growth as the main source of economic development. Attention gradually shifted, and industrialization was prescribed as the panacea for the developing economies. The trend reversed once more, and agricultural sector has risen into prominence in recent years. Another remarkable recent development is the revival of interest in the analysis of the source and effects of technical change. These topics of current interest constitute the basic theme of the present study which aims at integrating the question of agricultural growth with that of induced technical change, placing special emphasis on the distributional aspects of such change. It opens up with the appalling observation that there exists a huge gap in agricultural productivity among different countries which cannot be explained by variations in soil fertility alone. Proceeding further, the study finds that investments in agricultural research and extension programmes contributed significantly in raising the farm productivity of different countries. The essential features of agricultural development are analysed next as a means to increasing our power of interpreting the process. The resulting analytical framework is used to examine the nature of agricultural transformation in Bangladesh. It is found that despite favourable influences of some forces, lack of proper and pragmatic public sector policies stood in the way of agricultural development of the country. This leads to the natural extension of the study to a vitally important but hitherto neglected area in which a formal model is developed to help the public sector find out the optimal allocation of its research and extension funds among various alternative farm activities. The model deals with a finite number of such activities and determines the efficient allocation in each crop subject to explicit physical and financial constraints. In addition, it also throws some light on the distributional effects of postulated technical change. The model is empirically implemented in the context of four major production activities in Bangladesh involving jute, rice, sugarcane, and tea. In order to achieve this, different parameters of the model are estimated through econometric and other techniques. The results of the analysis reveal certain interesting facts. Rice is found to dominate other crops by virtue of its massive share in total agricultural output of the country. However, the conditions of final demand and the costs of the programme turn out to be important variables in the allocation of funds to the remaining crops. Among them sugarcane dominates the rest, followed by jute and tea. It is also found that technical change in rice production will be detrimental to its producers. This finding is important in several respects, but most important, it suggests that the public sector should take deliberate steps to offset the loss accruing to the rice growers to induce them to adopt the new technology.;Studies related to the allocation of resources to agricultural research and extension programmes are very few. Given that the agricultural sector is highly important in the economies of most of the developing countries, and that its performance has been quite disappointing in all but a few of them; the agricultural development strategies of many countries need to be re-examined and reformulated. The present study can be of some help in attaining this objective. However, this is one of the first studies in this area and these issues cannot be resolved on the basis of a single investigation. Repeated studies encompassing aspects of the problem that we were unable to incorporate will lead to the gradual accumulation of knowledge, permit a better understanding of the phenomenon, and help evolve a more effective way to deal with the entire issue.