Enhancing rural income through public agricultural R&D: Spatial spillover and infrastructure thresholds

• Published date: 01 May 2022
• Author: Jintao Zhan,Yubei Ma,Wuyang Hu,Chao Chen,Qinan Lu
• Date: 01 May 2022
• DOI: http://doi.org/10.1111/rode.12872

Rev Dev Econ. 2022;26:1083–1107. wileyonlinelibrary.com/journal/rode

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1083

© 2022 John Wiley & Sons Ltd

Received: 22 October 2020

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Revised: 18 January 2022

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Accepted: 18 January 2022

DOI: 10.1111/rode.12872

REGULAR ARTICLE

Enhancing rural income through public

agricultural R&D: Spatial spillover and

infrastructure thresholds

JintaoZhan1

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YubeiMa1

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WuyangHu2

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ChaoChen1

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QinanLu3

1College of Economics and Management,

Nanjing Agricultural University, Nanjing,

China

2Department of Agricultural,

Environmental, and Development

Economics, The Ohio State University,

Columbus, Ohio, USA

3Department of Agricultural and Applied

Economics, University of Wisconsin–

Madison, Madison, Wisconsin, USA

Correspondence

Wuyang Hu, Department of Agricultural,

Environmental, and Development

Economics, The Ohio State University,

Columbus, OH 43210, USA.

Email: Hu.1851@osu.edu

Funding information

National Natural Science Foundation of

China, Grant/Award Number: 71673139

and 72073069; Priority Academic

Program Development of Jiangsu Higher

Education Institutions; National Office

for Philosophy and Social Sciences,

Grant/Award Number: 21AZD007

Abstract

How much farmers benefit from public agricultural re-

search and development (R&D) has been a topic of con-

tinued interest. Compared to studies based on classical

statistics, we show theoretically and employ the Spatial

Durbin Model and the Panel Threshold Regression

Model to investigate the different impacts and spatial

spillover effects of public agricultural R&D on farm and

nonfarm income. Using China's provincial panel data

from 2000 to 2015, we find that public agricultural R&D

has a positive impact on rural household income. This

impact is mainly reflected by nonfarm income and ex-

hibits heterogeneous interprovincial- spatial spillover.

We also find that interregional differences in infrastruc-

ture, represented by road transportation and Internet

access in rural areas, are the main reasons for the spa-

tial heterogeneity. Higher road density and Internet

penetration enhance the positive impact of public ag-

ricultural R&D on rural income, and the enhancement

exhibits characteristics of thresholds, after which the

size of enhancement becomes increasingly larger.

KEYWORDS

agricultural R&D, high- speed Internet, road density, rural

household income, rural infrastructure, spatial spillover,

threshold

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ZHAN et al.

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INTRODUCTION

How to increase rural household income has been an issue of interest for governments and

researchers (e.g., Mondal et al., 2021; Wang, Shao, et al., 2019). Government actions typically

include increasing investments in agricultural research and development (R&D), increasing ag-

ricultural subsidies, and developing nonagricultural industries in rural areas. Among them, ag-

ricultural R&D is one of the most important means to ensure long- term growth in agricultural

productivity, improve rural income, and reduce uncertainties in future development (Anderson

etal.,1994; Wang, Huang, et al., 2019).

The impact of agricultural R&D on productivity, income, and poverty alleviation has been ex-

amined intensively (e.g., Alston,2018; Alston & Pardey,2013; Deng etal.,2021; Fan etal.,2005;

Huang & Rozelle, 2009; Lai etal., 2017). These studies, however, usually focus on the direct

impact of agricultural R&D and give little thought to the spillover effect caused by spatial correla-

tion. Evidence shows that in regard to the analysis of geographical spatial data, spatial interde-

pendence cannot be ignored (Anselin,2003). For instance, some researchers found that for some

poorer countries, the spillover effect can be so prominent that it supersedes the direct impact of

R&D (e.g., Fuglie, 2018; Evenson,2000; You & Johnson,2010). In these countries, the increase

in agricultural productivity almost solely relied on the technological spillover from other coun-

tries (Alfranca & Huffman,2003; Johnson & Evenson, 1999; Thirtle etal.,2010). This spillover

effect also exists among provinces or states within a single country (McCunn & Huffman,2000;

Plastina & Fulginiti,2012; Zhan etal.,2017).

Agricultural R&D helps increase rural household income. However, past studies mainly fo-

cused on how the total household income is affected, without differentiating farm and nonfarm

income (e.g., Alene & Coulibaly,2009; Kassie etal.,2011). This differentiation can, however, be

important for developing countries. Take China as an example— in 2013, rural household in-

come from salaries surpassed that from farm operation, and salaries have now become the most

important source of rural household income. This trend is similar in other developing countries

as well (e.g., Escobal,2001). Given the pivotal role agricultural R&D plays in enhancing agricul-

tural productivity, continued increase in agricultural R&D will likely free more labor from the

agricultural sector and enable workers to seek employment in nonagricultural sectors, effectively

increasing the non- farm income of rural households (Fan etal.,2005; Zhou etal.,2022).

Agricultural R&D usually works hand in hand with proper rural infrastructure develop-

ment (Fan etal.,2000). Lagging infrastructure development will increase transaction costs,

which will offset cost savings brought by R&D (Lin, 2009). It follows that increases in ag-

ricultural R&D should be in line with infrastructure improvements. For developing coun-

tries, the development of rural transportation facilities is especially important. Increased road

density not only lowers transportation costs, encourages business expansion, and promotes

agricultural product trade, but it also increases interactions between rural and urban areas,

providing farmers with more employment opportunities in urban regions and chances to in-

crease their income through more diversified sources (Aggarwal, 2018; Fan & Chan- Kang,

2008; Hu etal.,2008; Renkow etal.,2004; Wong etal., 2013). In addition, the development

of rural communication facilities may assist the growth of agricultural productivity and rural

JEL CLASSIFICATION

C31; Q16; R53