Postprint version. Published in American Journal of Agricultural Economics, Volume 80, Issue 4, November 1, 1998, pages 830-838. Copyright © 1998 Agricultural & Applied Economics Association. Published by Blackwell. The definitive version is available at http://www.jstor.org/stable/1244067.
NOTE: At the time of publication, the author Stephen Hamilton was not yet affiliated with Cal Poly.
A multiple-market framework is developed to measure the size and distribution of research benefits. The model considers an upstream raw product market and a downstream finished product market and allows for imperfect competition in the intermediary food-processing sector. A central conceptual result is derived: an increase in raw product output is a sufficient condition for cost- reducing innovations in the farm sector to increase social welfare. A special case of linear farm supply and isoelastic processing production functions reveals that necessary conditions for welfare to decrease are a convergent farm supply shift, an oligopsonistic upstream market configuration, and increasing returns-to-scale processing technology.