An 'Ex Ante' Analysis of the Incidence of Relative Returns from R&D and Promotion Investments in the Australian Sheep and Wool Industries

Abstract

This paper uses an equilibrium displacement model of the Australian sheepmeat and wool industries to estimate and compare the potential total returns from ten hypothetical research and promotion investments, and their distribution across different sectors of the Australian sheepmeat and wool industries. Information on the distribution of the gains from alternative R&D and promotion investments can assist with policy decisions about how to allocate limited resources among a number of investment options. The efficient investment of research and promotion funds plays an important role in enhancing industry competitiveness. Given the current uncertain market conditions for wool and sheepmeat, Australian sheep and wool producers should naturally be concerned about the returns from such investments, as their levies constitute a large proportion of the funds. The results from this study indicate that Australian sheep and wool producers should receive higher shares of total industry returns from research undertaken at the farm-level than from research undertaken in downstream industry sectors. The results also suggest that, if effective, promotion in export markets should be preferred to promotion in the domestic market.