R&D policy evaluation: a case study on Law 46/1982 in Italy
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Date
2011Author
Barbieri, Elisa
Iorio, Roberto
Lubrano Lavadera, Giuseppe
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Even in the context of neo-classical theory, characterized by a strong trust in the
virtues of the free market, the need for a policy intervention in the field of
research and innovation is theorized, because of the presence of market failures.
In the contemporary context of economic and public finance crisis, on one side
there is a strong need to boost the industrial productivity through investment in
research and technology; on the other side the public budget constraints call for
prudency. In this context the need for systematic evaluations of public incentives
to firms is particularly strong. In this context, the paper offers an evaluation
exercise on the major instruments used to promote R&D and innovation
activities of Italian firms.
The analysis concentrates in particular on the incentives offered by Law 46/1982
(and revisions) and their effects on firms expenditures and employment in R&D.
The Law represents the main national funding program as well as the longest
lasting single instrument for technology and innovation promotion, although
revisions of the Law have occurred. In addition to Law 46/1982, Italian firms
have the chance to benefit from a larger span of public subsidies, particularly at
the regional and local level. This makes the counterfactual question of “what
would have happened without the policy” particularly interesting since it is
likely, and this is confirmed by the data, that firms that do not access to the
incentives of Law 46/82 benefit from other sources of public financing.
Therefore it is particularly important to consider the effects of Law 46/82 not just
in the hypothetical situation of complete absence of policy intervention, but also
when other similar laws are at work.
For this reason besides the difference-in-difference estimation, the paper
analyses the effects of Law 46/1982 through a difference-in-difference-indifference
model, which allows to verify whether the interaction between
different kinds of incentives has a multiplicative or a substitutive effect.
The paper also addresses another typical aspect of evaluation studies: the average
effect of the policy normally retrieved seems to be not sufficiently informative,
especially in a country characterized by a marked territorial economic dualism
(Centre-North vs. South) and by a strong presence of small-medium firms, with
profoundly different characteristics from large firms. In other words the effects
of the policy instrument might vary substantially among firms. Therefore the
paper takes explicitly into consideration the different effect of the incentives on
different sectors (according to Pavitt classification), on different size of firms and
in different zones of the country. The database used for the analysis is the
Capitalia Survey (former Mediocredito Centrale). Data are obtained from three
consecutives surveys for a total of nine years starting from 1995 to 2003.