Evaluating quality improvement in nonhomogeneous agricultural commodities : the case of Australian beef

This paper develops conceptual and empirical frameworks for assessing the economic benefits from agricultural research which enhances the amount of a desirable characteristic in each unit of a heterogeneous commodity. The commodity is assumed to comprise two or more joint products accruable in fixed proportion. Quality improvement is perceived as an increase in the proportion of a joint product with more of a more-valued characteristic and, as such, is modelled as a shift in the supply curve of a joint product rather than via a shift in commodity demand. A proxy variable is constructed to measure an intertemporal quality change and to estimate the associated size of the supply shift. An application of the framework to the Australian beef industry indicates that the per unit amount of the characteristic 'freshness' in beef has increased over the last two decades. Substantial social benefits can be obtained by research which enhances the quality of Australian beef carcasses. A larger share of the total benefits accrue to beef producers.