How should be the levels of public and private R&D investments to trigger modern productivity growth? Empirical evidence and lessons learned for Italian economy

Governments in modern economies devote much policy attention to enhancing productivity and continue to emphasize its drivers such as investment in R&D. This paper analyzes the relationship between productivity growth and levels of public and private R&D expenditures. The economic analysis shows that the magnitude of R&D expenditure by business enterprise equal to 1.58% (% of GDP) and R&D expenditure of government and higher education of 1.06 (% of GDP) maximize the long-run impact on productivity growth. These optimal rates are the key to sustain productivity and technology improvements that are more and more necessary to modern economic growth.