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R&D in the Norwegian National accounts

This paper by Knut Ø. Sørensen from Statistics Norway discusses the treatment of Research & Development (R&D) in the Norwegian national accounts. It covers the importance of R&D for growth and productivity analysis, challenges in incorporating R&D into economic statistics, and preliminary findings for Norway in 2005. The study explores methods for estimating R&D capital stock and production in line with international standards like the Frascati Manual and the System of National Accounts (SNA). It also highlights the significance of R&D services in the economy and the complexities of measuring R&D transactions accurately within the existing statistical frameworks.

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R&D in the Norwegian National accounts

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  1. Presented by Knut Ø. Sørensen Statistics Norway Agenda item 4 Invited paper 14 R&D in the Norwegian National accounts

  2. General approach in Norway Statistics Norway has a project for compiling a satellite account, in which R&D is mainly regarded as gross fixed capital formation The interest in R&D has several sources: The stock of knowledge capital is wanted for use in analyses of growth and productivity There is a general interest in education, knowledge and R&D in Norway (are we lagging behind other nations?)‏ Revised SNA: how to treat R&D We have had a grant from Eurostat studying R&D The National accounts need to improve on some aspects of R&D How to use R&D statistics to supplement present sources?

  3. General approach Use the R&D statistics, collected according to the Frascati Manual, as far as possible Production is compiled, using the Canberra group/NESTI bridge tables Adding data from the foreign accounts (imports, exports), total supply = total use can be estimated Use of R&D for fixed capital formation is derived as a residual, based on estimates of exports, change in inventories and intermediate consumption

  4. R&D capital stock Capital stock is estimated with the PIM method The price index is input price index for market production i NACE73 (business services: research and development services)‏ Average service life set at 10 years This is not an empirical estimate, but seems to be in line with assumptions used in other countries Further details of the consumption of capital as for other (market) industries.

  5. Main preliminary results for Norway 2005 Increase in GDP level, current prices: 1.1% Of which 60% is due to increased fixed capital formation in market activities Increase in GDP volume growth: 0.2% Practically no change in GNI at current prices We have not introduced changes in the foreign accounts

  6. Bridge table from GERD to production GERD R&D intramural expenditures: 29643 less R&D expenditure for investments 2072 plus purchases of R&D for intermediate cons. 2160 plus consumption of capital for prod. of R&D 1202 plus operating surplus from R&D production - 794 plus net other taxes on production of R&D - (?)‏ less adjustment for own account investments of software and oil exploration already included 2090 Equals production of R&D services in the National Accounts 28046

  7. Capital services in R&D production In order to estimate the value of R&D production, we have to add operating surplus and consumption of capital. We have done so on the basis of observations for the industry Nace73 The ratio of consumption of capital to current operating costs for NACE73 is applied to the current operating costs stated in the R&D statistics. Current operating costs for Nace 73 could be adjusted for costs not included in the R&D statistics, such as IC of R&D and FISIM The ratio of operating surplus to consumption of capital for Nace73 is applied to R&D production

  8. Capital services in R&D production - 2 • If capital services from R&D-capital are important in producing R&D-services in Nace73, this should be reflected in the observed operating surplus, even though R&D-services are not specified. • If, alternatively, we would estimate all capital stocks involved in the R&D-production in order to calculate capital services from each type, • firms in the business sector could change the use of their existing capital stocks to produce R&D, this would not be reported as investment expenditure in the R&D survey (?) • R&D survey do not cover all types of capital (?) such as software or R&D-capital • when services from R&D capital is specified, it is demanding to use this method to establish the R&D capital series.

  9. Transactions in R&D services R&D services produced by unit A and sold to unit B, should not be gross fixed capital formation in unit A, but in unit B If the unit B combines the purchased services from A with its own R&D and sell the combined result to another unit C, the R&D should be capitalized in unit C. The value added by unit A should not be counted as value added also in unit B. In this case the purchase by B should be intermediate consumption of unit B Data for transactions in R&D services are hard to find in the R&D surveys, but are needed to get investments by industry

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