Stochastic technical change and procyclical TFP - The case of Italian agriculture

The paper questions the use of Total Factor Productivity (TFP) measures as a proxy for the technological level in Italian agriculture. TFP growth reve als a cyclical behaviour and a short-run component due to shocks on both th e demand and supply sides. In order to identify real long-run technological change, a Kalman filter procedure is applied to a stochastic process depic ting the generation of technical change induced by R&D and Extension expend iture. The empirical evidence reveals that short-term shocks greatly affect the traditional measure of productivity. A better indicator of technologic al progress can be obtained by estimating the long-run component of product ivity, which seems to be significantly induced by R&D-Extension public expe nditure.