R&D and Productivity in High-Tech Manufacturing: A Comparison between Italy and Spain

Using data for 12 manufacturing industries over the period 1980-2006, we perform for Italy and Spain a dynamic panel estimation of the long-run elasticity of total factor productivity (TFP) with respect to R&D capital. In spite of recording a level of R&D capital lower than Italian industries, the technology-based industries in Spain have experienced a similar or higher long-run impact on TFP. This is mainly attributable to what occurred from the mid-1990s onwards when, thanks to increasing R&D efforts, the Spanish industries have been able to catch up with respect to the Italian ones. These findings suggest that, also in countries classified as technology followers, R&D investment is a crucial condition for boosting manufacturing productivity.