Effects of R&D spending and Spill-Over on Agricultural TFP in Iran




Investing in research and development spending (R&D) affects total factor productivity (TFP).
Recently new theories of economic growth have emphasized the relationship between R&D and TFP
and also identified a number of channels through which a country’s R&D affects TFP of its trade
partner. This study seeks to estimate the effect of agricultural R&D and education spending and some
other factors on agricultural TFP in Iran during 1971 to 2011. Agricultural TFP is calculated using
Kendrick Index and the model is estimated by OLS method using E-Views 7.0.
All explaining variables in the model (right-hand variables) effect on agricultural productivity in
different lags positively with 5% confidence. The best lag length is opted using Akaike information,
Schwarz and Hannan-Quinn criterion. The results show that 1 percent increase in R&D spending in
agriculture, education expenditure in agriculture, government investing in agriculture and rainfall will
promote agriculture TFP 0.13 percent by 5 lags, 0.10 percent by 2 lags, 0.14 percent by 1 lag and 0.17
percent at the same time respectively. R&D spending in other sectors (except agriculture) and import
of capital inputs in agriculture are contained in the model as research spill-over. The elasticity of these
two factors is estimated 0.09 by 5 lags and 0.04 by 2 lags