Benefit sharing mechanisms for agricultural genetic diversity use and on-farm conservation

Abstract

The agricultural genetic diversity is reducing at an accelerating pace. Benefit sharing mechanisms are well-known instruments to incentivize local genetic resource providers to maintain on-farm diversity and to avoid free-riding behaviour by multinational bioprospecting firms. We explore the role of these mechanisms in a setting where the output of bioprospecting activities (i.e. a modern seeds variety) competes, through an indirect channel (the release of a new modern crop variety), with traditional agriculture, but the latter is, in turn, necessary to conserve the genetic pool from which multinational firms could have access to adapted genetic traits for developing new modern varieties in the future. The on-farm diversity is fundamental to increase the option value of conservation. While gene banks guarantee the access to a large genetic pool, the preservation and selection of varieties in ecological niches by farmers ensures an evolutionary process of genetic adaptation from which extracting new useful traits in the future. Thus, we adopt a multistage game where a multinational firm anticipates the impact of its bioprospecting investments and price setting decisions on a local farmer incentives to conserve on-farm genetic diversity. We focus our attention on two benefit sharing mechanisms, namely profits sharing and technology transfers, and compare them with a benchmark featuring free genetic resources access. Our main conclusions suggest that incentives to conservation are the strongest under profit sharing, while a technology transfer produces a genetic erosion that is even higher than under free access. These results shed new light on policy design, especially in developing countries where agricultural genetic diversity is a strategic natural asset.

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Fig. 1

Notes

  1. 1.

    See, for details, OECD (2011), Täuber et al. (2011) and Shand (2012).

  2. 2.

    See, for instance, Isakson (2011), Cavatassi et al. (2011), Erlich and Narayanan (2014), Coromaldi et al. (2015).

  3. 3.

    This implies the need for patent protection to be established under international systems, such as the Agreement on Trade and Intellectual Property Rights (TRIPS) and the International Convention on Protection of New Varieties of Plants (UPOV).

  4. 4.

    The Secretariat of the Convention on Biological Diversity, Nagoya Protocol on Access to Genetic Resources and The Fair and Equitable Sharing of Benefits Arising From Their Utilization, 2011. Montreal, Canada.

  5. 5.

    See, for instance, Simpson et al. (1996), Goeschl and Swanson (2000), Costello and Ward (2006), Moschini and Yerokhin (2008), Sarr et al. (2008).

  6. 6.

    See, among others, Dedeurwaerdere (2005), Gatti et al. (2011), Richerzhagen (2011), Markandya and Nunes (2012), Onofri and Ding (2012), Welch et al. (2013), Polasky (2009).

  7. 7.

    Expected benefits from future bioprospecting incorporate both discounted revenues and costs associated to future bioprospecting and variety development.

  8. 8.

    Uncertainty in the revenues from adopting a new modern variety stems from the fact that local farmers may be first time users. Moreover, the modern varieties are expected to outperform the traditional ones if their cultivation is coupled with modern agricultural practices that involve the use of chemical fertilizers and pesticides at an optimal rate, which may be unknown to unexperienced farmers (Evenson and Gollin 2003; Byerlee 1996)

  9. 9.

    We here exclude the uncertainty on local landraces yield potentially caused by climatic shocks, pests, diseases or droughts. These shocks are exogenous and likely to have an adverse expected impact on both landraces and modern varieties. On the contrary the MV yield uncertainty may be considered as an idiosyncratic uncertainty (Munshi 2004; Koundouri et al. 2006).

  10. 10.

    To guarantee economically meaningful equilibrium values and that second order conditions hold, we assume that \(\gamma >\frac{1}{2},\)\(h<\frac{1}{4},\)\(\beta +2\gamma -1>0\) and \(1-4h-2\phi >0.\)

    Also, in order for \(0<L\leqslant 1\) and for positive expected revenues under any scenario, we assume \(R+h<y\leqslant c+R+h+\Omega ,\) where \(\Omega =\min \left\{ \frac{r\left( \gamma -2h+2h\beta \right) }{c\left( 1-\beta \right) \left( \beta +2\gamma -1\right) }-\frac{2hr\left( 1-4h\right) }{c\left( \beta +2\gamma -1\right) };\frac{r\left( 8h^{2} +8h\phi -4h+2\phi ^{2}-2\phi +\gamma \right) }{c\left( 2\gamma -1\right) }\right\} \)

  11. 11.

    Second order conditions are straightforward in this case since \(\frac{d^{2}EU}{\partial L^{2}}=-c<0\) .

  12. 12.

    Detailed comparative statics can be found in the Appendix.

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Correspondence to Alessio D’Amato.

Appendix. Results from comparative statics

Appendix. Results from comparative statics

  \(d\beta \) \(d\phi \)
\(dP_{m}\) \(\frac{2r\left( h\beta ^{2}+\beta \gamma -2h\beta +\gamma ^{2} -\gamma +h\right) }{c\left( \beta -1\right) ^{2}\left( \beta +2\gamma -1\right) ^{2}}>0\)  
\(dI_{m}\) \(\frac{(4h-1)r}{c\left( \beta +2\gamma -1\right) ^{2}}<0\)  
\(dL_{m}\) \(\frac{2h}{c}\frac{dI_{m}}{d\beta }-\frac{1}{c}\frac{dP_{m}}{d\beta }<0\)  
\(dP_{t}\)   \(\frac{r}{c(1-2\gamma) } <0\)
dIt   \(\frac{2r}{c(1-2\gamma)} <0\)
\(dL_{t}\)   \(\frac{2r(1-2\phi -4h)}{(2\gamma -1)c^{2}}>0\)

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Cheng, W., D’Amato, A. & Pallante, G. Benefit sharing mechanisms for agricultural genetic diversity use and on-farm conservation. Econ Polit 37, 337–355 (2020). https://doi.org/10.1007/s40888-019-00142-y

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Keywords

  • Bioprospecting
  • Genetic diversity
  • Modern varieties adoption
  • Monetary benefit sharing
  • Technology transfer

JEL Classification

  • Q15
  • Q56
  • Q58