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Agricultural Research and Productivity 



Figure 7.5: Possible Time Pattern of n 



product will enjoy higher incomes in the long run depends: (ajon 

 the cross-elasticity of demand between the new product and 

 other products of the industry, and (T^j (relaxing the assumption 

 of a fixed number of producers) on the elasticity of supply of 

 similarly skilled producers who may be lured into the industry by 

 persistent profits. If these two factors are unimportant, the in- 

 troduction of the new product will increase profits in the long as 

 well as in the short run. If inputs are not fixed, the introduction of 

 the new product will alter shadow prices, and profits in competi- 

 tive equilibrium will vanish, but incomes may be higher than 

 before the introduction of the innovation. 



The boundary between rent to innovativeness and additional 

 income to noninnovating latecomers is not clear. But it should be 

 reemphasized that: (a) the returns to high-skilled producers from 

 early adoption are over and above what they earn in other lines of 

 production; and (b) these returns are transitory. To maintain 

 them, the skilled producers have to search continuously for new 

 ideas and products. 



From the social point of view, the rent to innovativeness is a 

 payment for skills, i.e. investment in schooling and training, for 

 efforts in adaptation, and for risk-taking. The last elements do not 



