4.3 Article

Exploring the impact of R&D and climate change on agricultural productivity growth: the case of Western Australia

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Publisher

WILEY
DOI: 10.1111/j.1467-8489.2010.00514.x

Keywords

climate change; cointegration; generalized impulse response function; productivity growth; R&D expenditure

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This article empirically examines the impact of R&D and climate change on the Western Australian Agricultural sector using standard time series econometrics. Based on historical data for the period of 1977-2005, the empirical results show that both R&D and climate change matter for long-run productivity growth. The long-run elasticity of total factor productivity (TFP) with respect to R&D expenditure is 0.497, while that of climate change is 0.506. There is a unidirectional causality running from R&D expenditure to TFP growth in both the short run and long run. Further, the variance decomposition and impulse response function confirm that a significant portion of output and productivity growth beyond the sample period is explained by R&D expenditure. These results justify the increase in R&D investment in the deteriorating climatic condition in the agricultural sector to improve the long-run prospects of productivity growth.

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