The aim of this study is analyzing the relationship between expenditure on research and productivity in agricultural sector for time series of 1980-2007. For this purpose actuarial causality between the cost of research and productivity vector auto regression (VAR) has been used. The results showed that there is one-way relationship between research and productivity. Also the diagrams of reaction functions showed that both research costs and productivity variables are sensitively related to change in the rate of other variables. Also for analyzing and determining a long-term equilibrium relationship between variables Johansen-Juselius cointegretion method was used that includes two tests of maximum eigenvalue test and trace test where there is a vector of cointegretion relationships that shows there is stability relationship between research and productivity as well.

Keywords: Agricultural research spending, Production, Unit root, vector Auto Regression (VAR)

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