The impact of public R&D and extension expenditure on Italian agriculture:an application of a mixed parametric-nonparametric approach

The paper analyses technical change in Italian agriculture, focusing both o n the effects of public R&D-extension investments and on the induced innova tion hypothesis. A mixed parametric-nonparametric approach is used. First, in a multi-output framework, technical change is depicted in the form of 'n etput augmentation' through a nonparametric general description of the prod uction set. Then a parametric dynamic relationship between netput augmentat ion, public R&D-extension investments and changes in relative prices is spe cified. The empirical analysis shows that the main impact of public R&D and extension investment in Italian agriculture is on capital use and animal p roducts. A crucial role is played by market mechanisms through induced inno vation.