Is Private R & D Spending Sensitive to Its Price? Empirical Evidence on Panel Data for Italy.

In this paper empirical evidence is presented on the elasticity of private R & D spending on its price. A censored panel-data regression model with random effects is applied to a balanced panel of 726 Italian firms over the 1992–1997 period. Implied estimates point out that Italian firms' response to policy measures (including tax credits), aimed at reducing the user cost of R & D capital, is likely to be substantial (1.50–1.77). Furthermore, we also find that the elasticity of R & D spending is higher in recession (2.01) than in expansion (0.87). [ABSTRACT FROM AUTHOR]