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Public R&D Investment and Cost Behaviour in Italian Agriculture: 1960-1995

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  • Esposti, Roberto
  • Pierani, Pierpaolo

Abstract

The public R&D capital stock is introduced as a quasi-fixed input in a variable cost function. The relative shadow price allows the correct measurement of the equilibrium levels of quasi-fixed inputs thus explicitly assessing the hypothesis of public R&D under (over) investment. By introducing an appropriate R&D price in the long-run equilibrium, the model can also provide empirical evidence on the rationale driving public R&D investment and on the hypothesis that free-riding on public R&D can explain overinvestment. Moreover, the model allows a formal testing of the induced innovation hypothesis and a more accurate calculation of both internal rate of return to R&D and residual exogenous productivity growth. The empirical implications of the model are appraised in the case of Italian agriculture for the period 1960-1995.

Suggested Citation

  • Esposti, Roberto & Pierani, Pierpaolo, 2002. "Public R&D Investment and Cost Behaviour in Italian Agriculture: 1960-1995," 2002 International Congress, August 28-31, 2002, Zaragoza, Spain 24974, European Association of Agricultural Economists.
    • Handle: RePEc:ags:eaae02:24974
    DOI: 10.22004/ag.econ.24974
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    References listed on IDEAS

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    1. Baldi, Lucia & Casati, Dario, 2005. "Induced Innovation in Italy: An Error Correction Model for the Period 1968-2002," 2005 International Congress, August 23-27, 2005, Copenhagen, Denmark 24590, European Association of Agricultural Economists.

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