UNL’s 36 percent return rate ranks second nationwide

A study has shown money invested in the Agricultural Research Division is offering an internal rate of return of 36 percent.

The UNL study found that for every $1 invested in ARD, the major research arm of the university’s Institute of Agriculture and Natural Resources and Nebraska’s Agricultural Experiment Station, investors received the equivalent net annual benefits of 36 cents every year for 31 years, amounting to $17.

This is more than twice the national average return of $8.

Nebraska’s ARD returns rank second nationally with only the University of Missouri’s Agricultural Experiment Station ranking just slightly higher with a 37 percent rate of return. The study was conducted in all 48 continental U.S. states. On average, the rate of return in other states was 29 percent.

“These returns are very impressive,” said Lilyan Fulginiti, UNL agricultural economist. “The ARD’s 36 percent rate of return beats the 9 percent and 12 percent average returns of the S&P 500 and NASDQ composite indexes during the same period.”

Fulginiti conducted this research, along with Alejandro Plastina, an economist at the International Cotton Advisory Committee.

Fulginiti and Plastina calculated the rate of return on investments by taking expenditures that were allocated to ag experiment stations in each state and comparing them with the private cost savings generated by productivity improvements stemming from these public research and development expenditures.

Researchers looked not only at the impact of research and development in each state, but also at the research impacts on other states. For example, they looked at how research and development in Nebraska affects states with similar production characteristics like Iowa and Missouri.

They found that even though Nebraska receives less public agricultural research dollars than Iowa, for example, the bang for the buck of Nebraska research seems to be higher than of Iowa. And while California gets a lot more research dollars than any other state, it produces relatively low spillover productivity in other states.

This is mainly due to the fact that production in California is highly capital input intenstive, while that is not the case in other states.

The study covered the years 1949-1991, the longest uninterrupted time that could be studied.

Fulginiti noted that there usually is a lag between research innovations and the adoption of the new technology, which means the stream of benefits tends to be low in the years immediately following the investment and more concentrated later, as the new technology becomes more widely used.

Fulginiti and Plastina now are collaborating with the USDA to update their calculations to 2008 and to include Extension funding. They also are looking at returns on investment on public infrastructure, such as roads, bridges, etc.

Housed on East Campus, the ARD has several other research sites across the state, including four UNL Research and Extension centers at North Platte, Scottsbluff, Norfolk and Lincoln and a system of centers, farms, laboratories and forests across the state.

The ARD is the only public entity in Nebraska charged with conducting ag research. It is part of a national network of state ag experiment stations at land-grant universities across the United States.

— By Sandi Alswager Karstens, IANR News Service