Who bears the burden and who receives the gain? The case of GWRDC R&D investments in the Australian grape and wine industry

It is only when R&D levies are invested in the sectors in which they are raised that the distribution of the benefits among industry sectors is exactly the same as the incidence of the levies. This article examines the distributions of both costs and returns from the Australian grape and wine R&D investments and the divergence between the two distributions. The real shares of R&D costs are estimated through the incidence of the levies and compared with the nominal shares. Grape-growers, winemakers and overseas consumers are shown to receive bigger proportions of gains than their proportions of costs, while the Australian government and other domestic parties as a group bear a much higher proportion of costs than returns. This article discusses implications of results for the equity issue between premium and nonpremium producers, the free-rider issue for overseas consumers, and the justification of government funding of grape and wine R&D. [EconLit citations: Q16, Q18, and H43].