INSTITUTIONAL LOCK-IN AND PRODUCER-CONTROLLED CROP RESEARCH CHECK-OFFS IN SASKATCHEWAN

Abstract

Today, there are nine provincially legislated check-off programs in Saskatchewan. Check-off and research investment rates among these programs are typically low. Most check-off rates are below 0.5 per cent of the value of the underlying commodity and agency research expenditures as a percentage of the value of the underlying commodity are, in most cases, less than 0.1 per cent. Persistently low levels of investment combined with evidence from empirical studies suggest farmers chronically underinvest in crop research from a profit maximizing perspective. The refundable nature of Saskatchewan crop research check-offs may be one reason why farmers’ collective level of research investment has not increased in a material way. Of the nine provincially legislated crop check-off agencies, eight were established and continue to operate as Commissions which administer mandatory yet refundable check-offs. With refundable check-offs, producers may request and receive a full refund of their check-off contribution. It can be hypothesized that Commissions may set check-off rates below the optimal, farmer-profit-maximizing level to avoid excessive refund requests. Anecdotal evidence from the Saskatchewan Pulse Development Board and Australia’s Grains Research Development Corporation suggests that when check-offs are compulsory check-off rates are higher. Despite the apparent advantages of switching to compulsory levies, no Commission has attempted to switch. The findings of this thesis suggest Crop Development Commissions in Saskatchewan suffer from institutional lock-in which inhibits their ability to switch to non-refundable check-offs. Large set-up cost associated with establishing a Commission, coordination effects that occur both within a Commission and between Commissions, and the adaptive expectations of farmers and those directly involved with crop development check-offs have made the costs of switching from a Commission to a board prohibitively high. As a result, Commissions are entrenched and unable to adopt non-refundable check-offs.