1. Policy and Economic Considerations for Global Public Goods Provision: Agricultural and Health R&D Funding From the Private, Public, and Philanthropic Sectors
Pierre E. Biscaye
Evans School Policy Analysis & Research Group (EPAR)
Daniel J. Evans School of Public Policy and Governance
University of Washington
This research project began with the broad question What is an efficient allocation of funding public goods across private, public and philanthropic secotrs? This question was not limited to agriculture and health R&D, we are also thinking about funding decisions relating to environmental global public goods, telecommunications and other technological global public goods. Today I’ll just be talking about our work to date looking at funding decisions in global agricultural and health R&D research. But the ultimate goal is to summarize broad but useful criteria for potential funders of investments with public good characteristics to inform mostly public and philanthropic decisions across an array of GPGs for which private investment is likely to be involved but below socially optimal levels.

2. Overview Background Methods
Funders’ Incentives and Capabilities for R&D Public Goods Investment
Agricultural and Health R&D Investments by Sector
Discussion of Findings

3. Agricultural and Health R&D “Publicness”
R&D produces knowledge that can be used repeatedly – non-rival
Results of R&D may fall under patent or IP protections – some excludability incentivizes private sector R&D investment
Knowledge from basic ag and health R&D may have wide potential applications – “global” public goods
Results of more applied ag and health R&D, specific to certain crops/diseases, may have more geographically concentrated benefits
When research and development (R&D) produces knowledge that can be used repeatedly and that is costly to exclude from non-payers, that R&D exhibits pure public good characteristics, and is hence likely to be under-provided by markets relative to the socially optimal level (Samuelson, 1954). When the potential pool of beneficiaries of R&D is global, as in the case of investments in agricultural and health R&D for crops and diseases with applications across multiple countries and regions, such R&D may be considered a global public good (GPG) (Mondiale, 2001).

4. Why Multiple Sectors Funding R&D?
New health technologies can improve individual health and educational outcomes, boost incomes, and contribute to herd immunity and other social benefits (Røttingen et al., 2013; Banke-Thomas et al., 2015)
New agricultural technologies can improve farmers’ yields and promote regional food security, sustainable use of natural resources, and other social benefits (reduce poverty and environmental degradation)
(Naseem et al., 2010; Adato & Meinzen-Dick, 2007; Meinzen-Dick et al., 2003; Hazell & Haddad, 2001; Kerr & Kolavalli, 1999)
To summarize expectations for which funders should target which types of ag and health R&D we start by outlining the goals and priorities of the different funder types. There are many reasons for undertaking agricultural R&D, ranging from strongly financial motives relating to profit, to broader national development goals, to even broader global goals like reducing food insecurity or conflict. the public sector will fund it if they believe it is otherwise underprovided b/c of the PG characteristicss. The private sector will provide it if it makes money. so this slide is about non-provate incentives.

5. Characteristics of Selected Areas of Agricultural and Health R&D
Agricultural R&D
Cash crops/commodity gains: more frequently traded, cultivated by both low- and high-income populations, higher potential financial returns, high social benefits
Orphan crops/subsistence crops: less frequently traded, more commonly cultivated by low-income populations, lower potential financial returns, but high social benefits
Health R&D
Overall global health: includes diseases and other health conditions affecting both high- and low-income populations, high potential financial returns and social benefits
Neglected diseases: diseases primarily affecting low-income populations, lower potential financial returns, but potentially high social benefits
Cash crops include crops primarily not grown for food such as cotton, palm oil, and tobacco, and commodity gains include frequently marketed crops such as rice, maize, and wheat
Orphan crops include sorghum and millets, groundnut, cowpea, common bean, chickpea, pigeonpea, cassava, yam and sweet potato. They are not extensively traded and receive little attention from researchers compared to the main crops, These are important crops for marginal environments of Africa, Asia and South America, and are often important subsistence crops for poorer farm households
Overall global health includes all funding for biomedical R&D, covering both infectious and non-infectious diseases, such as cancers, heart disease, and lower respiratory infections
Kassebaum et al. (2016 ) report on the top 15 global causes of DALYs among 315 diseases and injuries. The top cause of DALYs is heart disease (164 million DALYs), followed by cerebrovascular disease (118 million DALYs), and lower respiratory infection (103 million DALYs). The list includes three neglected diseases: diarrheal diseases (#6, 71.6 million DALYs), HIV/AIDS (#10, 66.7 million DALYs), and malaria (#14, 55.8 million DALYs).
Neglected diseases as defined by the G-Finder report as diseases that “disproportionally affect people in developing countries,” which have a “…need for new products,” and for which a market failure exists, “i.e., there is insufficient commercial market to attract R&D by private industry” (Chapman et al., 2016), account for 15.6% of total global DALYs caused by diseases
This definition is distinct from “neglected tropical diseases” as defined by the WHO (2017): “Neglected tropical diseases (NTDs) are a diverse group of communicable diseases that prevail in tropical and subtropical conditions in 149 countries and affect more than one billion people, costing developing economies billions of dollars every year. They mainly affect populations living in poverty, without adequate sanitation and in close contact with infectious vectors and domestic animals and livestock.” We adopt the G-Finder definition of neglected diseases in this paper. The WHO does have a typology that sorts diseases into one of three categories (Types I, II, and III) according to their relative rates of incidence, which may be useful in considering the geographic distribution of R&D. In this typology, Type I diseases have a similar disease burden in both developed and developing countries and Types II and III have greater and significantly greater disease burdens in developing countries (WHO, 2012a). G-Finder sorts neglected diseases by more than just incidence, but they generally fall into Type II and III of the WHO classification.
The main area in which these categories of crops and diseases differ is in their potential financial returns, which relate to differences in potential market size and willingness to pay. Orphan crops and neglected diseases are primarily important to populations in low-income countries, limited both the absolute market size and WTP to the extent WTP is driven by ability to pay.
In general all these categories of R&D investment have high potential social benefits; cash crops and commodity grains are important for global livelihoods and food security, but orphan and subsistence crops also have an important role in global security. Neglected diseases do not have DALYs as high as those of some other chronic diseases like cancer but nevertheless pose an important burden on affected populations, and may pose an important constraint on economic development for those populations
The benefits of R&D in orphan crops and neglected diseases will primarily be concentrated in low-income countries, while the benefits of some investments in cash crops/commodity grains and in other diseases may be more globally spread.
The costs and probabilities of getting to market do not necessarily vary among the categories of agricultural and health R&D, as they depend on the specific characteristics of individual crops and diseases.
Since we are looking at categories of agricultural and health R&D we focus on characteristics that are likely to hold across crops and diseases in these categories.

6. Research Questions
From the perspective of a global planner, an efficient allocation of scarce global R&D funding would match private, public, and philanthropic resources to R&D types consistent with each funder’s private or social goals
How do characteristics of agricultural and health R&D and of private, public, and philanthropic providers of R&D funding affect the relative advantages of alternative sectors from a global planning perspective?
How do trends in agricultural and health R&D funding from public, private, and philanthropic sources for different categories of crops and diseases compare to expectations based on those hypothesized advantages?
There are some tools and models available seeking to help policymakers identify when a public good like R&D might be “under-funded.” For example it has been well documented that agricultural R&D is underfunded in developing countries relative to developed countries based on agricultural research intensity ratios – for every $100 of agricultural GDP in a developed country, roughly $3 is spent on research by public and private funders, an amount that has increased steadily over time, while in developing countries, for every $100 of agricultural GDP only $0.54 is spent on research. (THIS STILL DOESN’T INDICATE IT IS UNDERFUNDED – BY WHOSE CRITERIA?) MAYBE JUST NOT FAR LESS FUNDED?

7. Methods
Draw on literature to summarize incentives for R&D public good investment by sector (private, public, philanthropic) and public good characteristics of categories of agricultural and health R&D
Develop hypotheses for how a global planner would efficiently allocate funding by sector for:
Agriculture in general, and comparing R&D for cash crops and commodity grains to R&D for “orphan” crops and subsistence crops; and
Global health in general, and for “neglected diseases” in particular
Compare funding expectations against trends in private, public, and philanthropic investment in categories of agricultural and health R&D
To develop our criteria we conducted a literature review on what other authors have said about how characteristics of agricultural R&D and of providers of R&D funding affect the relative advantages of alternative funding sources, including work by several people here at this conference. We then summarize expectations surrounding the efficient allocation of agricultural R&D funds based on different types of agricultural R&D, namely R&D targeting agriculture in general, R&D targeting commodity grains, R&D for cash crops, and R&D targeting primarily subsistence crops.
The group of orphan crops includes sorghum and millets, groundnut, cowpea, common bean, chickpea, pigeonpea, cassava, yam and sweet potato. They are not extensively traded and receive little attention from researchers compared to the main crops, These are important crops for marginal environments of Africa, Asia and South America
We finally compare funding expectations against trends in agricultural R&D from public, private, and philanthropic sources, using the best data we could obtain.

8. Data Data for agricultural R&D funding:
CGIAR Agricultural Science and Technology Indicators (ASTI) – multiple years
United States Department of Agriculture (USDA) Economic Research Service
Reviews and estimates from the literature (e.g., Fuglie et al, 2016; Pardey et al., 2016)
Data for health R&D funding:
Jamison et al. (2013), Røttingen et al. (2013), Chakma et al. (2014), and Viergever & Hendricks (2016)
G-Finder surveys of neglected disease R&D funding (Moran et al., 2010; Moran et al., 2015; Chapman et al., 2016)
Other data:
Global Burden of Disease (2015)
Crop production and export value (FAOSTAT)
We rely heavily on the CGIAR Agricultural Science and Technology Indicators or ASTI data, as well as reviews and estimates drawn from the literature, and some USDA ERS data for more global tren, ds, especially for aggregate global R&D funding flows, as were summarized by Keith Fuglie during the pre-conference workshop on Sunday.
The US case also provides a rich theoretical foundation for describing the different roles of private and public funders – for examples these two charts from Fuglie in 2011 and from Frey (2000) illustrate how in US agricultural research the public sector funds a broader set of agricultural research types as compared to the private sector, and the public sector is also making longer-term investments (or investments with lower immediate financial returns) than the public sector. These are examples of the kinds of theory and evidence that we used to develop expectations for funding patterns in SSA and SA.

9. Simple Model of R&D Funding Considerations
Financial returns
Function of excludability, market size, market share, & consumer willingness-to-pay
Social benefits: e.g., herd immunity from vaccines, food security
Distribution of benefits: e.g., recovery of benefits by public investor constituents
Probability of getting products of R&D to market
Estimated time to market
Costs of completing stages of R&D
We assume a global social planner would allocate across sectors to:
- prevent duplicative funding and have the public and philanthropic sectors fill in the gap to the socially optimal level
Financial returns to R&D investment (R) and any social benefits (SOC) are primarily realized once the products developed as a result of the research reach the market (though knowledge is generated and patents may be purchased at earlier stages). The relative importance to investors of achieving social returns is captured by the parameter s. Costs (C) are incurred at each phase of research. A discounting term (r) reflects time preferences of funders: the more numerous and risky the phases of research, or the greater the time lag between expenditures and returns (t), the greater the discounting. Present value accounts for the often very long time lag between cost expenditures and market returns via discounting those returns by the real opportunity cost of capital over time (Echeverria & Beintema, 2009). Preferences for where the returns and expenditures from R&D investments are concentrated are captured through cost and returns location weights (loc weight).
These phases of R&D vary by sector (e.g. agriculture and health), and these differences can be incorporated into this framework. Financial returns (R) are a function of market size, market share, consumer willingness-to-pay. Size refers to the number of potential transactions, which derives from the number of consumers and the transactions per consumer – a distinction to reflect a difference between a one-shot vaccine compared to a chronic drug treatment, or the rate at which a hybrid seed’s vigor declines. Consumer willingness to pay is primarily a function of ability to pay (i.e., income), and the price of complementary and substitute goods – the latter of which also reflects market share and any seller’s ability to charge a price above marginal cost.
Returns also depend on the degree to which the public good is physically “excludable” (e.g., whether a drug offers lifelong protection or must be re-administered, or whether a crop variety is open-pollinated or must be re-purchased each year) or legally protected (e.g., via patents). For expository purposes we distinguish between biophysical and legal excludability. Biophysical excludability is low for knowledge, such as a discovery of a genetic code that can be shared at low cost with other researchers, or the economic benefits to smallholder farmers from the free exchange of improved open-pollinated variety seeds, or the health benefits to households arising from herd immunity following the introduction of a vaccine. But holding constant the biophysical characteristics of the product, excludability rises with legal property rights protection, and the degree to which de facto property rights approach de jure property rights.
Costs are presumed to vary by the phase of R&D, and include fixed costs, such as lab equipment and space, variable costs in the form of researchers and materials, and regulatory compliance costs. The time to market is a function of the stage of science and the complexity of the pathogen or genetic code, and regulatory requirements and processes (Rawlins 2004). The initial start-up research costs as well as ongoing development costs of maintenance or updating can be substantial (Barrett, 2003). Countries’ regulatory structures may also impose costs for R&D provision.

10. Hypothesized Funder Weighting
Preferences
Private
Philanthropic
Public
Financial Returns
Necessary
Not necessary
Social Returns
Not accounted for
(s = 0)
(s closer to 1)
Valued to some degree
(s > 0)
Location of Returns
Indifferent
(locR weight = 1)
Preferences but ranked below social returns
(locR weight = 1 for areas with high social returns)
Prefer domestic returns (locR weight < 1 for non-domestic beneficiaries)
Location of Expenditures
(locC weight = 1)
Prefer domestic expenditures (locC weight < 1 for domestic expenditures)
From a GSP point of view, the reasoning is (though a linear program would solve this across three sectors):
The reason that all three sectors would likely be in an optimization solution is the assumption that they weight these parameters differently: the private sector has 0 locational preferences and the public sector is country-biased; the public and philanthropic sectors will fund social returns that the private sector will not; the philanthropic sector is the least risk averse (not shown here) b/c they are not accountable, but social impact is necessary (more so than the public sector).
We also assume that the GSP will:
Have the private sector fund FIRST up to Qp* first, b/c they will not consider social returns but the other two sectors will consider both, their funding range is more limited

11. Hypotheses Economic theory suggests that:
Compared to the private sector, the public and philanthropic sectors direct a greater proportion of their agricultural R&D funding toward subsistence and orphan crops
Compared to the private sector, the public and philanthropic sectors direct a greater proportion of their health R&D funding toward neglected diseases
Our hypotheses are primarily based on differences in the potential financial returns and the geographic concentration of benefits from investment in different categories of agricultural and health R&D, and on generalizations across crops and diseases in these categories and across investors in the private, public, and philanthropic sectors
Hypothesis 1 – The public and philanthropic sectors direct a greater proportion of their agricultural R&D funding toward subsistence and commodity crops compared to the private sector. Within agricultural R&D, we would expect the private sector to direct more investment toward crops with greater potential financial returns from established markets and potentially higher willingness to pay. The potential returns on investment for subsistence and commodity crops are predominantly   social rather than financial in nature (Moran, 2011), so we would expect the public and philanthropic sectors to fill the void created by the absence of private sector funding and focus on subsistence and commodity crops to the extent that such investments offer larger marginal social returns. As both subsistence and commodity crops are important for food security in developing countries and generate significant social returns, (El-Sharkawy, 2006; Echeverria & Beintema, 2009; Piesse & Thirtle, 2010), public and philanthropic sources likely have an interest in providing R&D funding to both groups of crops.
Hypothesis 2 – The public and philanthropic sectors direct a greater proportion of their health R&D funding toward neglected diseases compared to the private sector. The potential financial ROI for diseases incident in high-income countries is generally greater than for neglected diseases, hence we would expect private R&D funding to concentrate on diseases that are incident in more developed countries with larger potential market sizes and higher willingness (or ability) to pay. As a result, the private sector is likely to allocate less funding for neglected diseases with relatively lower financial to social return ratios (Moran, 2015   ), leaving the public and philanthropic sectors to fill gaps in funding. The public and philanthropic sectors are also likely to target their R&D funding toward diseases in which reduced incidence or eradication would lead to significant social benefits. This preference may result in public and philanthropic sector funding overlapping with private sector funding as R&D investment in certain diseases (e.g., lifestyle diseases, cancer, etc.) may result in substantial potential social returns.

12. Overall Comparison of Agricultural & Health R&D Funding
Share of R&D spending by sector
Total global spending (private and public) on health R&D has increased dramatically since the 1980s
Estimated $30 billion in 1986, estimated $240 billion in (Røttingen et al., 2013)
Health R&D is largely (over 80%) funded by the private sector in high-income countries (Rottingen et. al, 2013; Jamison et al., 2013; Chakma et al., 2014)
Health R&D more funded than agricultural R&D
$69.3 billion in food and ag R&D in 2011 (Pardey et al., 2016b)
Agricultural R&D largely funded by the public sector (ASTI, 2012; Pardey et al., 2016b)
Ag (2008)
Health (2009)
Sources: Beintema et al., 2012; Røttingen et al., 2013
There are some tools and models available seeking to help policymakers identify when a public good like R&D might be “under-funded.” For example it has been well documented that agricultural R&D is underfunded in developing countries relative to developed countries based on agricultural research intensity ratios – for every $100 of agricultural GDP in a developed country, roughly $3 is spent on research by public and private funders, an amount that has increased steadily over time, while in developing countries, for every $100 of agricultural GDP only $0.54 is spent on research.

13. Private Funding: Agricultural R&D
Private Sector R&D Spending by Crop, 2014
Focus on large-acre market-oriented crops, in particular corn, soybeans, and wheat, in addition to small-acre cash crops like fruit and vegetables (Fuglie et al., 2016)
Subsistence crops like cassava, pearl millet, and sorghum are characterized by substantially lower levels of private research intensity (Naseem et al., 2001; CGIAR, 2011)
Source: Fuglie et al., 2016
$12.9 billion worldwide in 2014 (Fuglie et al., 2016)
59% was spent on crop R&D, 17% on animal R&D, and 24% on farm machinery R&D
Annual growth rate of 7% from
Most research is conducted by firms in high-income countries
Bayer, Syngenta, Dupont, and Monsanto each spent over $1 billion in 2014
Significant emphasis on research into agricultural chemicals, seeds, and biotechnology (Spielman, 2007)
Fuglie et al.’s (2016) estimates of private crop R&D by commodity. Private crop R&D spending focuses on large-acre market-oriented crops, in particular corn, soybeans, and wheat, in addition to small-acre cash crops like fruit and vegetables. In comparison, commodities widely consumed in low-income countries such as root and tuber crops, bananas and plantains, certain types of vegetables and fruit crops, and small-holder tree crops such as coffee and cacao receive relatively low levels of private spending. Fuglie et al. (2016) also find that private R&D spending relative to the gross production value of the commodity is highest for market-oriented crops.
In Asia, available published estimates of research funding similarly indicate that private R&D is concentrated in market-oriented crops, such as palm oil, rubber, tea, vegetables, and horticulture, hybrid varieties of rice, sorghum, millet, and maize, and improved livestock (Morris, 1998; Morris, Singh, & Pal, 1998; Pray & Fuglie, 2001; Gerpacio, 2003; Naseem et al., 2010). Morris (2002) finds that in Latin America and Asia, private investment in R&D for maize, a commonly produced and traded crop in these regions, is approximately twice that of the public sector.
Looking at whether our predicted funding allocations match expectations, based on available data the private sector certainly appears to be allocating its funding consistently with expectations – concentrating almost entirely on cash and market-oriented commodity crops, as shown here in the case of Monsanto on maize, oilseeds, vegetables, and cotton.

14. Private Funding: Health R&D
Global spending on health R&D in 2009 by the private sector amounted to $148.8 billion, about 60% of total funding (Jamison et al., 2013)
Most private investment targets non-communicable chronic diseases, especially cancers (Jamison et al., 2013)
In 2015, the private sector invested $471 million in neglected disease R&D, 15% of the total from all sectors (Chapman et al., 2016)
82% from multinational pharmaceuticals [MNCs], 18% from small pharmaceuticals and biotech firms [SMEs]
72% of MNC investment in neglected disease R&D went towards the “big three” infectious diseases (HIV/AIDS, malaria, and tuberculosis); only 24.9% of SME investments went to the “big three”(Chapman et al., 2016)
Global spending on health R&D in 2009 by the private sector amounted to $148.8 billion, about 60% of total funding (Jamison et al., 2013)
Most private investment comes from high-income and some middle-income countries
The private sectors in the United States, Europe, Canada, and Asia-Pacific Region funded $168.7 billion in health R&D in 2012 (Chakma et al., 2014)
The U.S. private sector alone invested $70.4 billion in health R&D in 2012 (ibid.)

15. Public Funding: Agricultural R&D
Total spending by country income group
Total spending by country/region
In the case of public funding the available data are somewhat better and improving thanks to the work of many ICABR members.
The most recent data on public funding for agricultural R&D compiled by Beintema et al. (2012) in the Agricultural Science and Technology Indicators (ASTI) Global Assessment of Agricultural R&D Spending report find that global public spending on agricultural R&D amounted to $31.7 billion in 2008, comprising approximately 79% of total global spending
India and China in particular accounted for nearly half of the global increase from 2000 to 2008, with China increasing public agricultural research spending by 38% and India by 11% during this period
Pardey et al. (2016b) find that in 1980, high-income countries spent $13.25 per person on public food and agricultural R&D compared to $1.73 per person in low-income countries. In 2011, public high-income country per capita spending increased to $17.73 whereas it decreased to $1.51 in low-income countries.
Source: ASTI, 2012

16. Public R&D Researchers by Crop Category
Some of the most detailed data from the ASTI indicators for looking at R&D to different crop types by the public sector come in the form of records on researcher employment – this chart summarizes the total full-time equivalent (FTE) researchers dedicated to different commodity grains, cash crops, and subsistence crops across SSA and South Asia.
As you can see, contrary to our expectations, the greatest share of public research expenditures in these two regions is directed to commodity and market-oriented crops, but orphan crops do receive significant research attention, particularly other roots & tubers in SSA and other pulses in SA – thought still not as much as commodity grains
One way to measure public sector funding is to identify the number of researchers paid by the government. Figure 4 summarizes the number of government and higher education researchers across crop categories in Sub-Saharan Africa and South and Southeast Asia., Major commodity crop categories – including major cereals but also fruits and vegetables – have the greatest numbers of public researchers, indicating higher levels of government agricultural R&D spending in these areas. We also observe large numbers of public researchers for cash crops cotton and oil-bearing crops. However, nearly 1,000 public researchers, primarily in Sub-Saharan Africa, study “other roots and tubers” including cassava, sweet potato, and yams (“orphan crops”, and more typically subsistence crops). Over 1,000 public researchers, primarily in South and Southeast Asia, study other pulses (beans other than soybeans), another key group of subsistence crops. Further, all categories of orphan crops (with the exception of coconut palm) are allocated more researchers than cash crops oil palm and tobacco. Consequently, “orphan” crops do not appear to be particularly neglected by researchers in Sub-Saharan Africa and South and Southeast Asia, though these regions only account for a small amount of global public agricultural R&D funding.    
Source: ASTI Database, 2017

17. Public Funding: Health R&D
In 2012, the public sector in the United States, Europe, Canada, and the Asia-Pacific Region spent $99.6 billion for health R&D (Chakma et al., 2014)
Estimated 30% of all health R&D funding in (Røttingen et al., 2013)
The U.S. is the largest public investor in health R&D ($48.9 billion in 2012) (Røttingen et al., 2013; Chakma et al., 2014)
U.S. National Institutes of Health (NIH) – $26.1 billion in 2013 (Viergever & Hendricks, 2016)

18. Public Funding: Health R&D
Top NIH-funded disease areas (2014): cancer, infectious diseases, brain disorders, rare diseases, pediatric disorders (Mullin, 2014)
The public sector provided $1.925 billion of funding for neglected disease R&D in (Chapman et al., 2016)
63% of the total
Mostly targeting the “big three” infectious diseases - HIV/AIDS, malaria, and tuberculosis
Top NIH-funded disease areas (2014): cancer ($5.4 billion), infectious diseases ($5B), brain disorders ($3.8B), rare diseases ($3.5B), pediatric disorders ($3.3B) (Mullin, 2014) – not just R&D but all funding

19. Philanthropic Funding: Agricultural R&D
Data on philanthropic investments are limited
Estimates for total philanthropic funding in 2008 ranged from $245.6 million (Coppard, 2010) to $450 million (Morton, 2010)
Top five Gates Foundation agricultural R&D grant recipients received $244.2 million from 2003 to 2010 for breeding and delivery of improved seed varieties (Gates Foundation, 2011)
Three of these five grants, totaling $99.2 million, focus on R&D for maize and wheat
One grant totaling $45 million targets development and delivery of staple crops, including commodity grains and crops that are generally for subsistence only (e.g., sweet potato, beans, millet, and cassava)
Largest grant, totaling $100 million, targets capacity building for both public and private breeding programs in 13 Sub-Saharan African countries.
Lastly not unlike private sector funding the available data on philanthropic spending on agricultural R&D is not clearly or systematically reported in a form that could easily allow a global planner to identify whether resources are being allocated efficiently based on philanthropic funders’ relative advantage. Public data on philanthropic funding of agricultural R&D are limited, as philanthropic organizations are not represented in the ASTI or OECD databases. Coppard (2010) estimates philanthropic spending on agricultural R&D for 2008 at $245.6 million, while Morton (2010) estimates a much higher funding level at $450 million.  
Public data on philanthropic funding of agricultural R&D are limited, as philanthropic organizations are not represented in the ASTI database and only the Bill & Melinda Gates Foundation is represented in OECD’s Creditor Reporting System. In 2015, the Bill & Melinda Gates Foundation   disbursed approximately $153 million for agricultural research in developing countries. From 2009 to 2015, their total contribution amounted to $858m.
Though data are limited, the Bill & Melinda Gates Foundation (BMGF) publicizes its own agricultural R&D expenditures. Between 2003 and 2011, the foundation was responsible for 80 grants funding agricultural R&D in Africa, totaling $642 million. This figure may be an overestimate, however, given grant-based funding often involves multi-year commitments (Spielman, Zaidi, & Flaherty, 2011). The BMGF’s top five grant recipients received $244.2 million from 2003 to 2010 for breeding and delivery of improved seed varieties (Gates Foundation, 2011). Three of these five grants, totaling $99.2 million, focus on R&D for maize and wheat. One grant totaling $45 million specifically targets development and delivery of staple crops, including both crops that are more commonly traded (e.g., maize, rice, and wheat) and crops that are generally for subsistence only (e.g., sweet potato, beans, millet, and cassava). The largest grant, totaling $100 million, targets capacity building for both public and private breeding programs in 13 Sub-Saharan African countries.

20. Philanthropic Funding: Health R&D
Top philanthropic funders for overall health R&D, 2013
About 10% ($21.4 billion) of health R&D investments in came from “other” sources, such as private non- profits and philanthropies (Røttingen et al., 2013)
Source: Viergever & Hendricks, 2016

21. Philanthropic Funding: Neglected Disease R&D
In 2015, private foundations contributed $645 million to neglected disease R&D, 21% of the total (Chapman et al., 2016)
62% of funding goes to the “big three” infectious diseases - HIV/AIDS, malaria, and tuberculosis (Chapman et al., 2016)
Source: Chapman et al., 2016

22. Funding of “Orphan” or Subsistence Crops
The private sector primarily funds market-oriented commodity crops and cash crops
Very little invested in “orphan” or subsistence crops
Philanthropic investment data are limited, but funding appears to overlap with public and private funding
No evidence of targeting of “orphan” or subsistence crops
More data available on public sector R&D investment – number of public researchers by crop in Sub-Saharan Africa and South and Southeast Asia

23. Drivers of Public Funding for Ag R&D in SSA?
Public R&D Researchers by Crop and Gross Production Value
Sub-Saharan Africa, 2014
Now as I said we expected public expenditure might relate to the importance of the crop domestically, so we compared these FTE allocations to the gross production value of the different crops by region. Here the yellow dots represent the gross production value of the crop in SSA, and the bars represent the total research FTEs allocated to that crop for publicly funded research.
The largest number of researchers focus on other roots and tubers (besides potatoes), a category of “orphan” crops, and in general the number of “orphan” crops researchers is comparable to that for commodity grains and non-orphan crops. The number of researchers appears to be loosely associated with the production value of different crops (as reported by FAOSTAT). The crops with the highest production values (other roots and tubers and maize) have the highest number of public researchers, and the crops with the lowest number of researchers all have relatively low production values.
Source: ASTI Database, 2017

24. Drivers of Public Funding for Ag R&D in SSA?
Public R&D Researchers by Crop and Export Value
Sub-Saharan Africa, 2014
We also hypothesized that public R&D would seek to avoid crowding out private funding for cash crops and might favor some commodity crops when those were primarily consumed domestically rather than sold in markets. When we look at patterns between public R&D spending in SSA and export values we see that the export value of rice maize and wheat are very low, suggesting public expenditures on R&D for these crops may indeed be a reflection of national food security and development goals.
We also see as predicted that crops with very high export values including cotton and tobacco see very little public R&D – this again makes some sense as we might predict the private sector would have a relative advantage for these types of crops with high and appropriable financial returns.
Source: ASTI Database, 2017

25. Drivers of Public Funding for Ag R&D in Asia?
Public R&D Researchers by Crop and Gross Production Value
South/ Southeast Asia, 2014
Figure 6 presents that same information for FTE public researchers, crop production value, and crop export value in South and Southeast Asia. As in Sub-Saharan Africa, one category of orphan crops – other pulses (all pulses other than soybeans) – is the focus of a relatively large number of public researchers, and commodity grains also receive research significant research attention.
Unlike in Sub-Saharan Africa, several categories of non-orphan crops have significantly more researchers than orphan crops. Vegetables, other fruits, cotton, and other oil-bearing crops all have more researchers than any category of orphan crops other than other pulses. This suggests that the public sector in South and Southeast Asia may be investing more in categories of agricultural R&D that could be funded by the private sector.
We also observe a limited association between production value and public research attention. Rice has the highest production value and the most researchers, but vegetables and especially potatoes appear to have much lower research attention relative to their production value, while other fruits and other pulses appear to have relatively high research attention accounting for their production value.
Source: ASTI Database, 2017

26. Drivers of Public Funding for Ag R&D in Asia?
Public R&D Researchers by Crop and Export Value
South/ Southeast Asia, 2014
The number of cotton and soybeans researchers appears primarily driven by the export value of these crops, but otherwise it is not clear that crop export value is associated with public research FTE allocation.
Source: ASTI Database, 2017

27. Funding of Neglected Disease R&D
Low funding (~1% of total for health R&D) relative to DALYs (~15% of total DALYs from diseases)
Public sector provides the majority of funding
Philanthropic sector also funds more than the private sector
Evidence of more specialization by sector than in agricultural R&D?
In 2009, neglected disease R&D funding was approximately 1% of total health R&D funding (Jamison et al., 2013)
The 2016 G-Finder report estimates total DALYs from neglected diseases at million (Chapman et al., 2016), or 15.6% of total global DALYs caused by diseases.
Drawing on data for neglected disease spending in 2009 from the 2010 G-Finder report (Moran et al., 2010) and Røttingen et al. (2013)’s estimates of funding by sector for total health R&D from the subset of mainly high-income countries for which disaggregation by sector was possible (representing 90% of total global R&D funding), we estimated the share of funding by sector allocated to neglected diseases. Based on these estimates, we find that the private sector allocated approximately 0.3% of health R&D funding to neglected diseases, compared to 3.3% for the public sector and 3% for the philanthropic sector.
The public and philanthropic sectors therefore allocated about 10 times more of their funding to neglected diseases than the private sector, relative to their total health R&D funding, supporting our second hypothesis.

28. Drivers of Funding for Neglected Disease R&D?
Public, private, & philanthropic neglected disease R&D spending shows limited associations with disease- specific DALYs
the “big three” infectious diseases were the most well-funded of the neglected diseases by a wide margin in 2015, receiving $2.144 billion or 71% of all neglected disease R&D funding (Chapman et al., 2016). Private sector investments focus on the “big three”, likely because these diseases have some levels of incidence in higher-income countries. The “big three” infectious diseases were also the top publicly-funded neglected diseases in 2015, receiving $1.442 billion, or 75% of all public funding for neglected disease R&D.
The high level of spending may in part reflect the large burden of DALYs due to these diseases, with HIV/AIDS responsible for 66 million DALYs in 2015, compared to 56 million from malaria and 40 million from tuberculosis. However, both diarrheal diseases and pneumonia and meningitis resulted in more DALYs in 2015 than the “big three”, but neither of these categories of diseases received much R&D funding.
Public funding for individual neglected disease R&D does not appear to closely track DALYs. HIV/AIDS received 43% of total public funding for neglected diseases compared to only 4% for diarrhoeal diseases, though both caused the same number of DALYs in Kinetoplastids resulted in 1.8 million DALYs in 2015, but received more public R&D funding than helminths (9.5 million DALYs), bacterial pneumonia and meningitis (75 million DALYs), salmonella (18 million DALYs), and rheumatic fever (10 million DALYs) (Chapman et al., 2016).
This lack of alignment can be due to DALYs being only one factor of R&D investments. The pathogenic complexity of certain diseases or the availability of an effective treatment may affect funding amounts. Helminths, for example, has an effective presumptive treatment while Kinetoplastids has a relatively ineffective and toxic treatment.
Source: Chapman et al., 2016
* Information on 2015 DALYs not available

29. Drivers of Funding for Neglected Disease R&D?
> Greater role for private sector for certain neglected diseases
Figure X presents 2015 data on funding for neglected disease R&D excluding the “big three” infectious diseases (Moran et al., 2009). The figure illustrates that while public sources provide the majority of R&D funding for most neglected diseases, private sources provide most funding for hepatitis C. These data focus on hepatitis C genotypes incident in developing countries, but the nature of hepatitis C research is such that research on one genotype may relate to research on other genotypes and eventually lead to a pan-genotypic therapy. This private sector focus on these neglected hepatitis C genotypes may in fact be due to the incidence of other hepatitis C genotypes—and thus a market for treatments—in developed countries.
Source: Chapman et al., 2016
* Information on 2015 DALYs not available

30. Discussion of Findings
Evidence supports the expectation that public R&D funding sources focus relatively more than private sources on subsistence and “orphan” crops and “neglected diseases” with smaller potential financial returns
BUT most public agricultural R&D still targets commodity grains and cash crops, similar to the private sector
In health R&D specialization is more apparent – public and philanthropic funders play a much greater role in “neglected disease” R&D funding relative to the private sector than in overall health R&D
BUT it is not clear that public and philanthropic funding is driven by the burden of disease as measured by DALYs, and most public and philanthropic funding goes to other diseases
In conclusions much of the evidence we have been able to find supports the expectation that private R&D funding sources focus on more market-oriented cash/commodity crops. We also see “neglected crops” including subsistence cereal crops, roots and tubers, and other under-researched crop species benefit from some public and philanthropic funding. But we also see that most public and philanthropic agricultural R&D targets commodity and cash crops, where the private sector arguably has a relative advantage.
This pattern in cash crops funding may suggest that in some instances the public sector is investing less in export-oriented cash crops precisely because these crops are more suited to private investment, consistent with our theoretical expectations (though these findings may be skewed by the lower production levels of cash crops compared to cereals). However, some of the most well-funded crops in both Sub-Saharan Africa and South and Southeast Asia are rice, maize, and wheat, and major cash crops including vegetables and oil crops – and in this respect it is not clear from available data that in aggregate public or philanthropic spending is allocated significantly differently than private spending, perhaps speaking to the financial, social, and food security value of staple cereal crops, or their share of local, regional, or international markets. But to the extent that this prioritization comes at the expense of less-traded subsistence crops, which receive less public R&D money, it challenges hypothesis one.
although public and philanthropic sources of funding do have a much greater focus on neglected disease R&D than private sources, it is not clear that public and philanthropic funding allocations are driven by social returns as measured by DALYs
Perhaps most importantly we are finding that unlike other R&D sectors where we are working (like health) data are sorely lacking on private sector research funding in agriculture – aggregates are outdated and mask variation in focus. There is also no way to clearly distinguish between public funding driven by public interests and public funding driven by access to donor funding.
This research is not meant to be a “calling out” of governments and philanthropists’ funding R&D that could potentially be undertaken by the private sector. Rather we are saying that the current level of data provided and shared by private, public, and philanthropic sources makes it difficult for a potential funder to judge whether crowding out of R&D funding might be occurring.

31. Discussion of Findings
Limitations in availability of R&D spending data
High social returns to R&D for commodity crops and for general health means we might expect some degree of overlap in the spending of public, private, and philanthropic sources
Decisions likely vary by funder within each sector, and by crop/disease with agricultural/health R&D
Partnerships may influence funding decisions
Public-private partnerships are becoming more common in R&D (Spielman, Hartwich, & Gerbmer, 2010; Ferroni & Castle, 2011; Woodson, 2016)
Public/philanthropic sources may prioritize spending to promote or facilitate private sector involvement
Push/Pull mechanisms to increase private spending
Perhaps most importantly we are finding that unlike other R&D sectors where we are working (like health) data are sorely lacking on private sector research funding in agriculture – aggregates are outdated and mask variation in focus. There is also no way to clearly distinguish between public funding driven by public interests and public funding driven by access to donor funding.
This research is not meant to be a “calling out” of governments and philanthropists’ funding R&D that should be undertaken by the private sector. Rather we are saying that the current level of data provided and shared by private, public, and philanthropic sources makes it difficult for a potential funder to judge whether crowding out of R&D funding might be occurring.
Other potentially interesting hypotheses
Compared to other funders,
Public sector government funders are more likely to fund agricultural and health R&D with greater potential returns for their domestic constituents; and
Public multilateral funders and philanthropic funders are more likely to fund R&D with greater returns for low-income populations
Ag financing mechanisms push/pull:
“Push” mechanisms – reduce the cost of conducting R&D:
o Public ag research: unclear whether this complements or substitutes private ag research
o Tax credits: mostly in place in developed countries, unfavorable to smaller firms
o Subsidies/grants: limited efficacy, not necessarily appropriate in environments where
little research infrastructure exists
o Tech commercialization programs: have been effective in the US, e.g. CRADAs
o Regulations: consumer protection, transparent regulatory processes, and
certification/labeling all reduce risk to firms and can increase consumer demand, but
too much regulation can reduce competitiveness and raise prices
o Research parks/zones: helps promote proximity to public researchers and private firms
to generate partnerships
 Agri-Business Incubator (ABI) by ICRISAT in Patancheru, India
 Agronatura Science Park by CIAT in Cali, Colombia
o Public-private partnerships: difficult to determine efficacy, potentially helpful but not
many in Ag R&D and those that exist are new
o Third-parties: impact of non-profits and other third-parties is largely untested in Ag R&D
o Strengthening innovative capacity: important component in moving research to societal
application, but not well tested for Ag R&D in developing countries
 “Pull” mechanisms – create better markets by increasing returns to or reducing risks from R&D:
o R&D market size and structure: innovation in R&D is at least partially determined by
market size, larger markets reduce incremental costs of R&D to firms
o Intellectual property rights (IPR): low-cost means of encouraging innovation, but
requires sufficient regulation/enforcement
o Trade/foreign investment liberalization: establishes the framework under which foreign
markets will demand developing country crops and under which foreign firms will invest
in Ag R&D for developing countries
o Advance purchase commitments: ensures returns to R&D by government or donor
o Rewards and prizes: attempt to pay suppliers commensurately to amount of social
returns to new technology

32. Thank you.

33. Evans School Policy Analysis & Research Group (EPAR)
Professor C. Leigh Anderson, Principal Investigator
Professor Travis Reynolds, co-Principal Investigator
C. Leigh Anderson, Travis Reynolds, Pierre Biscaye, Matthew Fowle, and Trygve Madsen
EPAR uses an innovative student-faculty team model to provide rigorous, applied research and analysis to international development stakeholders. Established in 2008, the EPAR model has since been emulated by other UW schools and programs to further enrich the international development community and enhance student learning.
Please direct comments or questions about this research to Principal Investigators C. Leigh Anderson and Travis Reynolds at