Assessing the returns to R&D on perennial crops: The costs and benefits of Pierce's disease research in the California winegrape industry

Abstract

Several complicating issues arise in evaluating the returns to research into varietal improvements for perennial crops compared with annual crops. We elucidate and address these issues in the context of a case study of research aiming to develop varieties that are resistant to Pierce's disease (PD) of grapevines. PD imposes costs of over $100 million per year on the California grape industry, even with public PD control programs in place. Research projects to develop PD resistant varieties of grapevines are at various stages of completion. We describe the economic problems posed by PD, document the research programs undertaken to address the disease and present an economic assessment of the returns to the investment, which are conditional on other policies. Using a simulation model of the market for California winegrapes, we estimate the benefits from research, development and adoption of PD-resistant vines as ranging from $4 million to $129 million annually over a 50-year horizon, depending on the length of the R&D lag and the rate of adoption. In addition to these specific quantitative results the paper offers insight into the broader question of economic evaluation of damage-mitigation technology for perennial crops.