Thesis (M.Com. (Economics))--North-West University, Potchefstroom Campus, 2008.

This thesis deals with the economic and environmental problems of biofuels in the Czech Republic and abroad. The goal is retrieval and analysis of economic studies that address economic and environmental impacts associated with the introduction of biofuels policy. Individual economic studies on the environment that are at work that are evaluated by using biofuels policy of macroeconomic and microeconomic models. Results of studies show that the introduction of biofuels policy creates economic and environmental impacts such as deforestation, environment, prices, employment and competitiveness of farmers.

A glicerina é um composto de grande utilidade em muitas áreas de aplicação. Atualmente, a maior fonte de glicerina é como subproduto da produção do biodiesel. Em 2010 o Brasil foi o segundo maior produtor de biodiesel no mundo com 2,4 milhões de m3. Estima-se que 10% da produção de biodiesel é glicerina bruta e destes 10%, aproximadamente entre 30% e 60% correspondem à glicerol. As impurezas são formadas por água, sais orgânicos e inorgânicos, ésteres e álcoois, e traços de glicerídeos. Como as aplicações mais nobres da glicerina requerem uma glicerina isenta de impurezas, novas rotas de purificação da glicerina bruta vem sendo estudadas. Neste sentido, o Laboratório de Separações Térmicas e Mecânicas da EPUSP propôs uma nova rota de purificação em 2008, na qual a ultima etapa é a desidratação de uma solução glicerol-água por meio de destilação trifásica usando tolueno como arrastador. O objetivo do presente trabalho foi estudar o comportamento deste tipo de destilação em uma coluna modulada com três pratos perfurados. Nesta coluna avaliou-se o layout de pratos e as melhores condições de operação. Os resultados, obtidos com este estudo, constituem uma contribuição importante para o projeto básico de coluna de destilação trifásica. As séries experimentais foram planejadas sequencialmente empregando-se planejamento estatístico de experimentos (DOE). Como variáveis de processo foram estudadas a vazão de vapor do tolueno (kg/h), vazão de alimentação de glicerina (kg/h) e concentração de glicerol na alimentação (% em massa). Como variáveis geométricas foram estudadas a área livre do prato () e a altura de vertedouro (Hw). O desempenho da coluna foi avaliado mediante o incremento da concentração de glicerol (em relação à concentração de glicerol na alimentação) e a concentração de glicerol no fundo da coluna (estas duas variáveis de resposta são dependentes entre si). A influência das variáveis de processo e geométricas nas respostas estudadas permitiram a construção de modelos estatísticos, e o melhor deles foi comparado com os modelos de não equilíbrio (NEQ) e de equilíbrio (EQ) obtidos por simulação no programa ASPEN PLUS. O modelo de não equilíbrio está baseado nas equações de Maxwell-Stefan, que utiliza a abordagem de Eckert e Vanek (2001) e a correlação de Chen-Chuang (1993), para estimar os coeficientes binários de transporte de massa. O modelo de equilíbrio utiliza as equações MESH (Material balance, Equilibrium, mole fraction Summation, and Heat balance). Conclusivamente, pode-se afirmar que as variáveis operacionais exercem maior influência do que as variáveis geométricas na desidratação da glicerina. As melhores condições foram: a vazão de vapor de tolueno de 23,5 kg/h, vazão de alimentação de glicerina de 2,2 kg/h e concentração de glicerol na alimentação de 50 % glicerol em massa, usando o layout L5 com área livre de 0,04 e altura de vertedouro de 70 mm. Os valores preditos pelo modelo estatístico (obtido com dados experimentais) e pelo modelo de NEQ representaram o comportamento da desidratação da glicerina por destilação trifásica à pressão atmosférica usando tolueno como arrastador, na coluna de pratos perfurados estudada. O modelo de EQ superestimou os valores reais. / Glycerine is a material of outstanding utility with many areas of application. Currently, the largest source of glycerine is as a by-product of biodiesel production. In 2010, Brazil was the second largest biodiesel productor in the world with 2.4 million m3. It is estimated that 10% of biodiesel is raw glycerine, and of this 10%, approximately between 30% and 60% corresponds to glycerol. The impurities are formed by water, organic and inorganic salts, esters and alcohols, and traces of glycerides. Although many attempts have been made to use raw glycerine, it is still necessary to purify it for of the most applications; hence new routes of glycerine purification have been studied. In this way, the Laboratory of Thermal and Mechanical Separations of EPUSP have proposed a new route of purification in 2008, where the last step is the dehydration of glycerol-water solution by three-phase distillation using toluene as entrainer. The aim of the present work was to study the behavior of the three-phase distillation using a modulated column with three sieve trays. In this column, the tray layout and the best operating conditions were evaluated. The results achieved in this study are an important contribution to the basic design of three-phase distillation column. Experimental series were designed sequentially employing a statistical design of experiments (DOE). The process variables studied were the vapor flow rate of toluene (kg/h), feed flow rate of glycerine (kg/h) and the feed glycerol concentration (% wt.). The geometric variables studied were the fractional hole area () and the weir height (Hw). The column performance was evaluated by the increment of glycerol concentration (in relation to the feed glycerol concentration) and the bottom glycerol concentration (these two variables are mutually dependent responses). The influence of process and geometric variables allowed the empirical models building, in which the best model was compared with the non-equilibrium (NEQ) and equilibrium (EQ) models obtained by the simulator ASPEN PLUS. The non-equilibrium model is based on Stefan-Maxwell equations, which uses the approach of Eckert and Vanek\'s (2001) and the Chen-Chuang correlation (1993), to estimate the binary coefficients of mass transport. The equilibrium model is based on the MESH equations (Material balance, Equilibrium, mole fraction Summation, and Heat balance). Finally, it can be stated that the operating variables have more influence than the geometric variables in the glycerine dehydration. The best conditions were: vapor flow rate of toluene of 23.5 kg/h, feed flow rate of glycerine of 2.2 kg/h and feed glycerol concentration of 50% wt., using the fractional hole area of L5 of 0.04 and weir height of 70 mm. The predicted values obtained by the statistical model and by the non-equilibrium model represented the behavior of the glycerine dehydration by three-phase distillation at atmospheric pressure using toluene as entrainer in the sieve tray column studied. The equilibrium model (EQ) overpredicted the real values.

A glicerina é um composto de grande utilidade em muitas áreas de aplicação. Atualmente, a maior fonte de glicerina é como subproduto da produção do biodiesel. Em 2010 o Brasil foi o segundo maior produtor de biodiesel no mundo com 2,4 milhões de m3. Estima-se que 10% da produção de biodiesel é glicerina bruta e destes 10%, aproximadamente entre 30% e 60% correspondem à glicerol. As impurezas são formadas por água, sais orgânicos e inorgânicos, ésteres e álcoois, e traços de glicerídeos. Como as aplicações mais nobres da glicerina requerem uma glicerina isenta de impurezas, novas rotas de purificação da glicerina bruta vem sendo estudadas. Neste sentido, o Laboratório de Separações Térmicas e Mecânicas da EPUSP propôs uma nova rota de purificação em 2008, na qual a ultima etapa é a desidratação de uma solução glicerol-água por meio de destilação trifásica usando tolueno como arrastador. O objetivo do presente trabalho foi estudar o comportamento deste tipo de destilação em uma coluna modulada com três pratos perfurados. Nesta coluna avaliou-se o layout de pratos e as melhores condições de operação. Os resultados, obtidos com este estudo, constituem uma contribuição importante para o projeto básico de coluna de destilação trifásica. As séries experimentais foram planejadas sequencialmente empregando-se planejamento estatístico de experimentos (DOE). Como variáveis de processo foram estudadas a vazão de vapor do tolueno (kg/h), vazão de alimentação de glicerina (kg/h) e concentração de glicerol na alimentação (% em massa). Como variáveis geométricas foram estudadas a área livre do prato () e a altura de vertedouro (Hw). O desempenho da coluna foi avaliado mediante o incremento da concentração de glicerol (em relação à concentração de glicerol na alimentação) e a concentração de glicerol no fundo da coluna (estas duas variáveis de resposta são dependentes entre si). A influência das variáveis de processo e geométricas nas respostas estudadas permitiram a construção de modelos estatísticos, e o melhor deles foi comparado com os modelos de não equilíbrio (NEQ) e de equilíbrio (EQ) obtidos por simulação no programa ASPEN PLUS. O modelo de não equilíbrio está baseado nas equações de Maxwell-Stefan, que utiliza a abordagem de Eckert e Vanek (2001) e a correlação de Chen-Chuang (1993), para estimar os coeficientes binários de transporte de massa. O modelo de equilíbrio utiliza as equações MESH (Material balance, Equilibrium, mole fraction Summation, and Heat balance). Conclusivamente, pode-se afirmar que as variáveis operacionais exercem maior influência do que as variáveis geométricas na desidratação da glicerina. As melhores condições foram: a vazão de vapor de tolueno de 23,5 kg/h, vazão de alimentação de glicerina de 2,2 kg/h e concentração de glicerol na alimentação de 50 % glicerol em massa, usando o layout L5 com área livre de 0,04 e altura de vertedouro de 70 mm. Os valores preditos pelo modelo estatístico (obtido com dados experimentais) e pelo modelo de NEQ representaram o comportamento da desidratação da glicerina por destilação trifásica à pressão atmosférica usando tolueno como arrastador, na coluna de pratos perfurados estudada. O modelo de EQ superestimou os valores reais. / Glycerine is a material of outstanding utility with many areas of application. Currently, the largest source of glycerine is as a by-product of biodiesel production. In 2010, Brazil was the second largest biodiesel productor in the world with 2.4 million m3. It is estimated that 10% of biodiesel is raw glycerine, and of this 10%, approximately between 30% and 60% corresponds to glycerol. The impurities are formed by water, organic and inorganic salts, esters and alcohols, and traces of glycerides. Although many attempts have been made to use raw glycerine, it is still necessary to purify it for of the most applications; hence new routes of glycerine purification have been studied. In this way, the Laboratory of Thermal and Mechanical Separations of EPUSP have proposed a new route of purification in 2008, where the last step is the dehydration of glycerol-water solution by three-phase distillation using toluene as entrainer. The aim of the present work was to study the behavior of the three-phase distillation using a modulated column with three sieve trays. In this column, the tray layout and the best operating conditions were evaluated. The results achieved in this study are an important contribution to the basic design of three-phase distillation column. Experimental series were designed sequentially employing a statistical design of experiments (DOE). The process variables studied were the vapor flow rate of toluene (kg/h), feed flow rate of glycerine (kg/h) and the feed glycerol concentration (% wt.). The geometric variables studied were the fractional hole area () and the weir height (Hw). The column performance was evaluated by the increment of glycerol concentration (in relation to the feed glycerol concentration) and the bottom glycerol concentration (these two variables are mutually dependent responses). The influence of process and geometric variables allowed the empirical models building, in which the best model was compared with the non-equilibrium (NEQ) and equilibrium (EQ) models obtained by the simulator ASPEN PLUS. The non-equilibrium model is based on Stefan-Maxwell equations, which uses the approach of Eckert and Vanek\'s (2001) and the Chen-Chuang correlation (1993), to estimate the binary coefficients of mass transport. The equilibrium model is based on the MESH equations (Material balance, Equilibrium, mole fraction Summation, and Heat balance). Finally, it can be stated that the operating variables have more influence than the geometric variables in the glycerine dehydration. The best conditions were: vapor flow rate of toluene of 23.5 kg/h, feed flow rate of glycerine of 2.2 kg/h and feed glycerol concentration of 50% wt., using the fractional hole area of L5 of 0.04 and weir height of 70 mm. The predicted values obtained by the statistical model and by the non-equilibrium model represented the behavior of the glycerine dehydration by three-phase distillation at atmospheric pressure using toluene as entrainer in the sieve tray column studied. The equilibrium model (EQ) overpredicted the real values.

We introduce the tractable buffer stock savings setup of Carroll (2009 NBER Working Paper) into an otherwise conventional New-Keynesian dynamic stochastic general equilibrium model with financial frictions. The introduction of a precautionary saving motive arising from an uninsurable risk of permanent income loss, affects the model's properties in a number of interesting ways: it produces a more hump-shaped reaction of consumption in response to both supply (technology) and demand (monetary) shocks, and more pronounced reactions in response to demand shocks. Adoption of the buffer stock savings setup thus offers a more microfounded way, compared to, e.g., habit preferences in consumption, to introduce Keynesian features into the model, serving as a device to curbing excessive consumption smoothing, and to attributing a higher role to demand driven fluctuations. We also discuss steady state effects, determinacy properties as well as other practical issues. (authors' abstract) / Series: Department of Economics Working Paper Series

O debate sobre a desindustrialização brasileira é bastante denso e ainda inconclusivo, embora haja algum consenso entre as diferentes vertentes econômicas de que o setor manufatureiro tem passado por dificuldades, principalmente após a crise financeira de 2008. Tendo este cenário em vista, o governo atuou na tentativa de restaurar a atividade industrial com algumas medidas de estímulo ao setor e através de políticas macroeconômicas (câmbio e juros). Nesse contexto, o presente trabalho investiga os impactos econômicos dessas políticas - redução da taxa de juros, desoneração da folha de pagamentos, redução do IPI, restrição ao fluxo de capitais estrangeiros (elevação do IOF) e redução da tarifa de energia elétrica - sobre a produção, o bem-estar, o consumo, entre outras variáveis macroeconômicas e setoriais. Além disso, busca-se analisar outras duas medidas alternativas - subsídio ao setor de transportes e reforma tributária, comparando seus resultados com aqueles obtidos pela avaliação das medidas já adotadas pelo governo. Para tanto, utiliza-se um modelo de Equilíbrio Geral Computável (EGC) calibrado para o ano de 2009, com o intuito de estudar cenários de adoção dessas políticas e contribuir para a literatura econômica de forma mais objetiva. Os resultados obtidos pela modelagem indicam que é possível afirmar que muitas das medidas implementadas mostram-se adequadas para o contexto da economia brasileira no pós-crise, seja pelos benefícios setoriais associados a um maior nível tecnológico da produção quanto pelos resultados macroeconômicos de reanimar a atividade econômica. As medidas de redução na taxa de juros (Selic e TJLP) e reforma tributária neutra que considera a substituição dos impostos intermediários pelo VAT são capazes de elevar o PIB e o bem-estar e ainda melhorar a composição setorial da produção e exportação, sem que a atividade do governo seja negativamente afetada. Outras medidas, como a desoneração da folha de pagamentos, reforma tributária com redução da receita fiscal, e a redução no IPI também trazem bons resultados, mas não se sustentam no longo prazo se não houver mudança na eficiência dos gastos públicos, uma vez que todas geram queda na atividade do governo. No sentido contrário, as medidas de subsídio ao setor de transporte, de redução da tarifa de energia elétrica e redução do fluxo de capitais externos, que implicam na atuação do governo sobre o livre funcionamento do mercado, geraram resultados indesejados no que diz respeito a um menor estímulo a indústrias de maior conteúdo tecnológico, além de não reverterem a perda de participação da indústria no emprego e no PIB. / Brazilian deindustrialization debate is quite dense and still inconclusive, although there is some consensus on the manufacturing struggle among different economic approaches, especially after the 2008 financial crisis. Considering this scenario, the government has been acting in an attempt to restore industrial activity by granting stimuli focused on the manufacturing sector and curbing currency appreciation. In this context, this study aims to investigate the economic impacts of these policies on GDP, welfare, consumption and macroeconomic and sectorial variables. Furthermore, alternative policies were considered, in order to compare the results with those obtained through the evaluation of effective government policies. Therefore, we apply a Computable General Equilibrium (CGE) model, updated for 2009, in order to study the effects of adopting these polices and contribute to the economic literature concerning this subject. The results indicate that it is possible to affirm that most measures are appropriate to help Brazilian economy after the crisis, both by sector benefits associated with a higher technological level of production and by improving macroeconomic outcomes. Measures to reduce interest rate (Selic and TJLP) and neutral tax reform that considers the replacement of intermediaries tax by VAT are able to raise GDP and welfare and to further improve the sectoral composition of production and export, without adversely affecting government activity. Other measures, such as payroll exemptions, tax reform with reduction of the fiscal income, and IPI reduction also bring good results, but would hardly be maintained in long term if there is no change in public spending efficiency, since all have negative impacts on government activity. On the contrary, subsidies to the transport sector, cuts in electricity rates and restriction to foreign capital inflow, which reflect government action on free market functioning, led to undesirable results in the context of raising technological level of the Brazilian production and reverse industry participation loss in employment and GDP.

Growing energy use and greenhouse gas emissions have implied an increased attention to the development of renewable energy sources. Bioenergy from forest biomass is expected to be one of the cornerstones in reaching renewable energy targets, especially in forest-rich countries such as Sweden. However, forest biomass is a limited resource, and an intensified use of bioenergy could affect roundwood and forest products’ markets in several ways. The overall purpose of this thesis is to analyze price formation and resource allocation of forest raw materials in the presence of increased bioenergy demand. The empirical focus is on the competition for wood fibres between bioenergy use and the traditional forest industries, as well as synergy effects between the various sectors using forest raw materials. The methodologic approach is partial equilibrium modeling (forest sector model), and the geographical focus is on Sweden. The thesis comprises three self-contained articles, which all address the above issues. The first paper presents an economic assessment of two different policies – both implying an increased demand for forest ecosystem services – and how these could affect the competition for forest raw materials. A forest sector trade model is updated to a new base year (2016), and used to analyze the consequences of increased bioenergy use in the heat and power (HP) sector as well as increased forest conservation in Sweden. These overall scenarios are assessed individually and in combination. The results show how various forest raw material-using sectors are affected in terms of price changes and responses in production. A particularly interesting market impact is that bioenergy promotion and forest conservation tend to have opposite effects on forest industry by-product prices. Moreover, combining the two policies mitigates the forest industry by-product price increase compared to the case where only the bioenergy-promoting policy is implemented. In other words, the HP sector is less negatively affected in terms of increased feedstock prices if bioenergy demand target are accompanied by increased forest conservation. This effect is due to increasing pulpwood prices, which reduces pulp, paper and board production, and in turn mitiges the competition for the associated by-products. Overall, the paper illustrates the great complexity of the forest raw material market, and the importance of considering demand and supply responses within and between sectors in energy and forest policy designs. The second article investigates the forest raw material market effects from introducing second-generation transport biofuel (exemplified by Bio-SNG) production in Sweden. Increases in Bio-SNG demand between 5 and 30 TWh are investigated. The simulation results illustrate increasing forest industry by-product (i.e., sawdust, wood chips and bark) prices, not least in the high-production scenarios (i.e. 20-30 TWh). This suggests that increases in second-generation biofuel productions lead to increased competition for the forest raw materials. The higher feedstock prices make the HP sector less profitable, but very meagre evidence of substitution of fossil fuels for by-products can be found. In this sector, there is instead an increased use of harvesting residues. Fiberboard and particleboard production ceases entirely due to increased input prices. There is also evidence of synergy (“by-product”) effects between the sawmill sector and the use of forest raw materials in the HP sector. Higher by-product prices spur sawmills to produce more sawnwood, something that in turn induces forest owners to increase harvest levels. Already in the 5 TWh Bio-SNG scenario, there is an increase in the harvest level, thus suggesting that the by-product effect kicks in from start. Biofuels and green chemicals are likely to play significant roles in achieving the transition towards a zero-carbon society. However, large-scale biorefineries are not yet cost-competitive with their fossil-fuel counterparts, and it is therefore important to identify biorefinery concepts with high economic performance in order to achieve widespread deployment in the future. For evaluations of early-stage biorefinery concepts, there is a need to consider not only the technical performance and the process costs, but also the performance of the full supply chain and the impact of its implementation in the feedstock and products markets. The third article presents – and argues for – a conceptual interdisciplinary framework that can form the basis for future evaluations of the full supply-chain performance of various novel biorefinery concepts. This framework considers the competition for biomass feedstocks across sectors, and assumes exogenous end-use product demand and various geographical and technical constraints. It can be used to evaluate the impacts of the introduction of various biorefinery concepts in the biomass markets in terms of feedstock allocations and prices. Policy evaluations, taking into account both engineering constraints and market mechanisms, should also be possible. Overall, the thesis illustrates the importance of considering the market effects when designing and evaluating forest policies and bioenergy policy targets. The forest industry sector and the bioenergy sector are closely interlinked and can both make or break one another depending on the policy design. The results indicate that for an increased demand of bioenergy, an industrial transformation is to be expected, as well as increased roundwood harvest.

LVT (Land Value Tax), unlike other taxes, causes no distortions in economic decision-making and therefore does not compromise the efficiency of a market economy. While there have been various challenges to this conclusion, it seems that the neutrality of LVT has been proven in the literature. Although it has been established conceptually that LVT is non-distortive, it is important to empirically test the effects of LVT reform in diverse aspects. Unlike other studies, this dissertation examines the economic, spatial, and welfare effects of LVT reform in a second-best situation employing an urban (and spatial) CGE (Computable General Equilibrium) model. In addition, it examines the distributional effects among different income groups and the short-term aspects of LVT as well. The feature that the present dissertation incorporates as the second-best situation includes LLZ (Large Lot Zoning). The computation and the assumptions about parameters for the current CGE model are made based on demographic, physical, and economic features of the Atlanta urban area in Georgia. The results suggest the following: (1) LVT reform is economically feasible, (2) the tax on land rent stabilizes prices and contracts the CBD (Central Business District) and urban boundary in the economy where the CBD and urban area are endogenously determined, while the tax on land rent is purely neutral in the economy where the CBD and urban area are fixed, (3) LVT reform increases the money-metric welfare of residents by about 20% of the tax revenue in the economy where residents are landowners, while LVT reform increases the money-metric welfare of residents by about 45% of the tax revenue in the economy where the lands are owned by absentee, (4) LVT reform more increases the money-metric welfare of the less-income groups that own the smaller land area, which is contrary to the case of LLZ, (5) LLZ and property tax can cause the sprawl of an urban area, but at a very low elasticity of substitution between land and the other factors (0.1), even switching from the land tax to the property tax (or graded property tax) can contract the urban area, (6) LLZ, in the long-term during which housing capital and urban boundary are not fixed and in the economy where residents are landowners, can improve the welfare of households, while LLZ worsens the welfare of households both in the economy where the lands are owned by absentee and in the short-term during which housing capital is immobile in any economy, (7) When we consider that housing capital is immobile, the increase in the money-metric welfare due to LVT reform becomes weak, compared to the case with perfectly mobile housing capital.

In this dissertation, two questions concerning monetary policy under the Taylor rule have been addressed. The first question is on, under the Taylor rule, whether a central bank should be responsible for both bank supervision and monetary policy or whether the two tasks should be exercised by separate institutions. This is the main focus of Chapter I. The second question is on whether the Taylor rule plays an important role in explaining modern business cycles in the United States. The second question has been covered by Chapter II. The implications of the first chapter can be summarized as follows: (i) it is inevitable for the central bank to have a systematic error in conducting monetary policy when the central bank does not have a bank supervisory role; (ii) without a bank supervisory role, the effectiveness of monetary policy cannot be guaranteed; (iii) because of the existence of conflict of interests, giving a bank supervisory role to the central bank does not guarantee the effectiveness of monetary policy, either; (iv) the way of setting up another government agency, bank regulator, and making the central bank and the regulator cooperate each other does not guarantee the effectiveness of monetary policy because, in this way, the systematic error in conducting monetary policy cannot be eliminated; (v) in the view of social welfare, not in the view of the effectiveness of monetary policy, it is better for the central bank to keep the whole responsibility or at least a partial responsibility on bank supervision. In the second chapter, we examined the effect of a technology shock and a money shock in the context of an RBC model incorporating the Taylor rule as the Fed??s monetary policy. One thing significantly different from other researches on this topic is the way the Taylor rule is introduced in the model. In this chapter, the Taylor rule is introduced by considering the relationship among the Fisher equation, Euler equation and the Taylor rule explicitly in the dynamic system of the relevant RBC model. With this approach, it has been shown that, even in a flexible-price environment, the two major failures in RBC models with money can be resolved. Under the Taylor rule, the correlation between output and inflation appears to be positive and the response of our model economy to a shock is persistent. Furthermore, the possibility of an existing liquidity effect is found. These results imply that the Taylor rule does play a key role in explaining business cycles in the United States.

Agricultural research and development (R&D) investment is becoming an increasingly important policy issue as food prices push upwards and food security problems emerge. An important source of agricultural R&D funding is from producer check-offs, which are increasingly being used to fund applied agricultural research such as disease management, genetic improvement, and weed control. Existing studies of producer-funded agricultural R&D indicate that there are high private and social rates of return to agricultural R&D investment by farmers, and thus that farmers are under investing in R&D. The focus of this thesis is at the producer level. This study examines one of the factors -- the horizon problem -- behind the apparent disincentive for farmers to invest in producer-funded R&D activities. It has been argued that given the long period of time over which the benefits of R&D investment occur, the increasing age of the farm population implies that the horizon problem could be indeed an important factor in producer underinvestment. Contrary to this widely acknowledged argument, this study shows the horizon problem is likely not a factor affecting farmers R&D investment decisions. Two models are developed to examine the horizon problem. The first model consists of a framework for determining the marginal internal rate of return of investing in R&D. Specifically, the model calculates the internal rate of return -- i.e., IRRh -- associated with the farmers' planning horizon and compares this to the internal rate of return -- i.e., IRR bar-- associated with the benefit horizon of the R&D. The impact of the horizon problem is determined by examining the difference between IRRh and IRR bar. The results of the horizon problem model show how that, contrary to what some authors have argued, the horizon problem is likely not a disincentive for R&D investment, unless the time horizon of farmers is very short. Given that the membership horizon for the average Canadian producer is 15 to 20 years, it is expected that the horizon problem is not an issue for Canadian producers. Furthermore, the analysis assumes farmers only are concerned with profit maximization. However, farmers may also consider other factors when making R&D investment decisions, such as future generations of agricultural producers and environment issues. The results of this study show that, even under the assumption of profit maximization, the horizon problem is not an issue for Canadian farmers, let alone in a more realistic model implemented by including factors other than profit. The results of the horizon problem model also show that the impact of the horizon problem is not affected by land tenure relationships. The second model consists of a multi-region, multi-product trade model that is used to examine the impact of Canadian pea R&D funding on consumers and producers in Canada and in various countries around the world that produce and consume pulses. To address the underinvestment issue, it is important to understand the question of who benefits from the research that is undertaken, and who bears the cost. Given that Canada is the largest pea exporter in the world an increase in R&D investment can be expected to have a significant impact on international trade and overseas producers and consumers. The simulation results from the second model illustrate that with increased pea R&D investment, Canadian producers, as well as consumers in all regions, are better off as a result of the R&D investment, while overseas producers are worse off. The results of the sensitivity analysis show that a pivotal supply shift associated with an increased levy, combined with a parallel supply curve shift due to increases in the knowledge stock, does affect the IRR in the large country versus the small country case. This result differs from the result that occurs when there is a parallel shift in supply at both the levy and R&D stages, indicating that it is important to understand the interaction between the manner in which R&D is funded, the way in which R&D affects supply and the trade status of a country. The results of the sensitivity analysis also indicate that the IRR to Canadian producers depends critically on how large an impact pea R&D has on the production of other crops (e.g., wheat and canola). The larger is this impact -- i.e., the more that wheat and canola production falls as a result of higher yields/lower costs of pea production -- the smaller is the IRR. The results also indicate that the elasticities of demand for peas and lentils in the importing countries do not have an impact on the IRR in the case where Canada is a large country exporter for peas only; however, they do have an impact on IRR in the case where Canada is a large exporter for both peas and lentils. In all cases, the more elastic is the demand, the higher is the IRR.