Chilean governments have simultaneously used a combination of price policies and expenditures on agricultural research in their efforts to enhance the performance of the agricultural sector. These two policy instruments, under changing political environments, have had important distributional implications for agricultural producers and consumers. Neglecting the interactions between these instruments may have distorted the measurement of research benefits. This dissertation examines the implications of agricultural price policies on the funding of public agricultural research. A political-economy framework allows for the interactions between producers and consumers/taxpayers in affecting policy formation. The welfare effects on each interest group are identified.

Agricultural price policies and research expenditures on beef, wheat, milk, apples, and grapes are considered within a simultaneous system of supply, demand, price and research policy equations. Economic and political considerations determine the choice between direct price policies and public research expenditures.

Results conform to theoretical expectations that the level and distribution of public research investments are affected by agricultural price policies. The implications derived from these results are that policies can be made more effective if decision-makers consider the complementarity or substitutability of these policy instruments. Agricultural production was influenced by direct price policies and by domestic agricultural research and foreign technology transfers. Publicly-sponsored agricultural research in Chile has had positive economic returns. The benefits to research, however, would have been larger if distorting price policies had not been present.