The importance of the technological spillovers for the returns to space investments, with an empirical application to the Italian high-tech and space sectors

In this paper we present the results of a recent research on R&D investments and productivity in the Italian manufacturing sector. By broadening the traditional perspective, which essentially looks at the impact of internal R&D on productivity, we explicitly account for the role of spillovers of technology. These have proven to be very pervasive and important in supporting the growth of labor productivity, especially spillovers originating in high-tech sectors. Since the Italian space industry has a significant role in those sectors, well beyond what its relatively small size would suggest, we take our results to indicate the importance of technological spillovers originating from the space industry for the progress of productivity in the Italian manufacturing. In the first part of the paper we describe, using a conceptual framework, well established in economic literature, how the benefits of space investments translate into increases in welfare. This approach broadens and hopefully sharpens the usual accounts of the benefits of space investments and hints to a potentially large contribution of the spillovers. In the second part of the paper we present the results of an empirical analysis that provides econometric estimates of the elasticities of labor productivity to knowledge spillover and R&D stock, based on Italian two-digit manufacturing sector panel data from 1980 to 2011.