Third-mission policy goals and incentives from performance-based funding: Are they aligned?

In competitive knowledge-based economies, policymakers recognize the importance of universities’ engagement in third mission activities. This article investigates how a specific policy approach to encourage third mission engagement—the use of performance-based funding to reward universities’ success in this domain—aligns with the broader goals of third mission policy. Considering the case of the UK, the first country to have implemented a system of this kind, we analyse how the system has come into being and how it has evolved, and we discuss whether its implementation is likely to encourage universities to behave in ways that are aligned with the goals of third mission policy, as outlined in government documents. We argue that the system encourages universities to focus on a narrow range of income-producing third mission activities, and this is not well aligned with the policy goal to support a complex innovation ecosystem comprising universities with different third mission objectives and strategies. The article concludes by proposing possible avenues for achieving greater alignment between incentives and policy goals.

Reforms, incentives, welfare and productivity growth in Chinese wheat production

Following the 1978 rural reform, a series of agricultural reforms were introduced in China with an aim to create incentives for the farmers to produce more. However, the nineties’ reforms towards liberalization eventually resulted in a huge drop in agricultural production, which apparently motivated the grain self-sufficiency program in 1998. For a dataset that covers wheat production during these reforms, we examine how and to what extent these reforms affected the Total Factor Productivity (TFP) and the welfare of wheat farmers in China, both at the national and at the regional level. We find that although the nineties' price reforms led to a relatively faster growth of the incentivized TFP of wheat production, they failed to improve profits vis a vis welfare for the farmers. A series of weather shocks in the early nineties resulted in a scarcity of cultivable land and a shortage of agricultural labour, which eventually led to a sharp increase in their relative prices. The introduction of grain self-sufficiency program stabilized these agricultural prices but destroyed the growth in TFP for most regions. However, this reform resulted in some improvement in farmers’ welfare. Wheat farmers in China therefore experienced a trade off between productivity and welfare; competition boosted their productivity and regulation improved their welfare. Not only these findings add a completely new set of results to the existing literature, they can also form a strong basis for future agricultural reforms in China.