End-point royalties and the performance of Australian wheat breeders Russell Thomson Melbourne Institute of Applied Economic and Social Research and the Intellectual Property Research Institute of Australia THE UNIVERSITY OF MELBOURNE The ‘performance’ of wheat breeders The Innovation Pathway
• Not about farmers adoption of new varieties by farmers in practice
• Not about actual commercial on-farm productivity
• Not about choice between end-point and up-front royalties CONTEXT: WHEAT BREEDING IN AUSTRALIA
• Historically, (almost) exclusively public breeding
– State government (VIC, QLD, NSW, WA) + U. Adelaide & U.Syd.
• 1996 First variety attracting ‘End Point Royalties’ released
Did the shift toward royalty funded breeding affect the performance of Australian wheat breeders? LITERATURE
Few related studies using crop trial data: Babcock and Foster (1991); Alson and Venner (2002); Kolady and
Canonical estimating equation, variety i in region j.:
yield = α RFB + β X + ε
Value created by new variety is the yield advantage.
Varieties not tested in all regions (sites) = selection bias
248 varieties (hard and soft); 23 regions; 10 breeders
Yield data from scientific variety trials.
• National Variety Trials & old state government sowing guides
• Does the breeder ‘look like’ it undertakes royalty funded breeding
– Data: The share of varieties released in the previous 5 years that attract end
1 Thanks to John Brennan, John Sheppard, Rob Wheeler, Alan Bedggood and Neale Sutton & National Variety Trials, Peter Martin, and Colin Wellings for providing data and assistance in interpretation and use.
ISSUE (1)‘VALUE’ = YIELD ADVANTAGE (NOT JUST YIELD) Issue: What do we do with negative estimated yield advantage? Proposed solution: Transform E(advantage)
If E(advantage) < 0, still some probability that they will outperform the frontier in some
describes the yield advantage of variety i at any randomly selected location:
POTENTIAL ADDITIONAL OUTPUT (Q) ISSUE (2) VALUE DEPENDS ON AREA OF ADAPTATION Issue: 23 regions differ in size Proposed solution: Scale the dependent variable.
New data on area of wheat cultivation in each NVT ‘region’: geo-coded regions around
ISSUE (3): VARIETIES NOT TESTED IN ALL REGIONS Solution: Type II Tobit (Heckman selection model).
• Are the breeders recent releases included in the trial region?
• (Robust to other candidates and identification through non-linearity of IMR).
DATA SUMMARY Measures of performance Explanatory variables Exclusion restrictions Estimator OLS Selection Dependent Pot. Add. Output Pot. Add. Output variable: Yield advantage (area. Weighted) (area. Weighted) Selection CONCLUSION: HOW DO ROYALTY FUNDED BREEDERS PERFORM?
• New data covering wheat trials in Australia 1978-2011
• New method for treating sub-frontier yielding varieties
• Accommodating selection in data & weighting by region size
• Royalty funded breeding associated with varieties included in more trials.
• Royalty funded breeding associated with less ‘valuable’; i.e., lower contribution to
total potential output of Australian wheat farms.
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