Research spillovers are the consequence of results from research in one region spilling over
into another region. These may include spillovers of technologies themselves or the effects of
research-induced price changes. When conducting studies on the evaluation of research
investments based on state level observations, interstate spillovers become an additional
problem. The importance of interregional spillovers was highlighted in a study conducted by
White and Havlicek (1979) when the rate of return was reduced from 70 percent to 29 percent
once outside research was considered. In Evenson’s 1978 study, similar geo-climatic regions
determine the impacts of interregional spillovers on a state’s productivity. In addition, the
structure of the agricultural experiment station system facilitates the interstate transfer and
adaptation of research information in neighboring states. Once the information has been
transferred, agricultural extension efforts, farmer education, and farmer income levels all affect
the rate of adoption (Otto, 1981).
The earliest evaluation studies (Griliches, 1958; Schultz, 1953) utilized the economic
surplus approach, also known as the consumer-producer surplus approach2. An economic
surplus approach is used to evaluate the benefits from a shift in the supply curve due to a change
in productivity. This productivity is theorized to be a result of technology generated form
agricultural research. Investigating this relationship between research investments and
improvements productivity using the economic surplus approach is shown as the most successful
approach to evaluating agricultural research (Alston, Norton & Pardey, 1995). The model used in
this approach is a comparative-static, partial equilibrium model of supply and demand in a
commodity market. Using this model, the shift in the supply curve generated from research and
technology is measured in relation to the “old” supply curve. Comparing the new and old
2 An illustrative comparison of the models used in the early studies is presented in Figure 1(Source: Zentner R.,
1982, page 202).