Public R&D meets Economic Development: Embrapa and Brazil's Agricultural Revolution

Abstract

Can public R&D investment in developing countries drive productivity growth? We study this question in the context of Brazil’s agricultural revolution and the Empresa Brasileira de Pesquisa Agropecuária (Embrapa), a public research corporation established in 1973 to develop locally relevant science and technology. First, using researcher-level data compiled from the resumes of all agricultural scientists in Brazil, we show that Embrapa redirected research toward locally important staple crops and toward Brazil’s particular ecological conditions, in part by sustaining productive research even in remote and research-scarce regions. Second, using municipality-level panel data from nine rounds of  Brazil’s agricultural census, we study how Embrapa affected agricultural production. We develop an identification strategy that exploits the staggered establishment of Embrapa’s research laboratories and heterogeneous exposure to the benefits from new innovation in ecologically distinct parts of the country. We find that municipality-level exposure to Embrapa significantly increased agricultural yields, driven both by expanded input use and higher residual productivity. Consistent with effects being driven by locally appropriate innovation, exposure to Embrapa predicts larger take-up of Embrapa’s new crop varieties and pronounced productivity gains only for the staple crops that were the focus of Embrapa’s research. Third, combining our estimates with a model, we find that public R&D investment increased national agricultural productivity by 110% with a benefit-cost ratio of 17. Embrapa’s decentralized structure, in which research labs were spread across many ecological zones instead of in a single hub, explains more than half of these gains.