Re-Examining the Reported Rates of Return to Food and Agricultural Research and Development: Reply

T.M. Hurley, X. Rao, P.G. Pardey

Research output: Contribution to journalComment/Letter to the editorAcademic

6 Citations (Scopus)

Abstract

Hurley, Rao and Pardey (2014) analytically and empirically evaluate the internal rate of return (IRR) vis a vis the modified internal rate of return (MIRR) for investments in agricultural research and development (R&D). They find that estimates of the IRR are 2.5 to 5 times larger than the MIRR for a wide range of assumptions, leading them to question the value of the IRR as a metric to represent the rate of return to agricultural R&D. Oehmke (2016) defends the IRR by arguing that it has important properties that the MIRR does not possess. In this article, we critically examine these properties demonstrating that some are not inherent to the MIRR. For other properties, we simply disagree with Oehmke’s assessment of their desirability. Therefore, we are not compelled to change our original recommendation.
Original languageEnglish
Pages (from-to)827-836
JournalAmerican Journal of Agricultural Economics
Volume99
Issue number3
Early online date10 Dec 2016
DOIs
Publication statusPublished - Apr 2017

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