Investigation into Global R&D Measurement Challenges

1. Muskie School of Public Service Agenda item 4 Ph.D. Program in Public Policy Measurement of R&D in National Accounts Barbara M. Fraumeni Muskie School of Public Service, USM, Portland, ME & the National Bureau of Economic Research, USA Conference of European Statisticians Joint UNECE/Eurostat/OECD Meeting on National Accounts Geneva, Switzerland April 23, 2008

2. Muskie School of Public Service Ph.D. Program in Public Policy Consistency in Overall Results • Nominal $ increase in GDP • Norway 1% 2004, 2% 2005 • Netherlands 1.2% 1999-2005 • United States 1959-2004 2.9% • Volume increase in GDP • Norway .2% • United States .2%

3. Muskie School of Public Service Ph.D. Program in Public Policy Questions About All R&D Satellite Accounts • Quarterly Estimates • Lags

4. Muskie School of Public Service Ph.D. Program in Public Policy United StatesOutput pricesRates of return

5. Muskie School of Public Service Ph.D. Program in Public Policy Output Prices • Use the average of 13 R&D intensive industry output prices OR • Use an input price index

6. Muskie School of Public Service Ph.D. Program in Public Policy Rates of Return • Purchased R&D • Specific to industry? Or the ratio of net operating surplus to gross output for misc. professional, scientific, & technical services

7. Muskie School of Public Service Ph.D. Program in Public Policy Questions • Particularly for the international information, how will series be extended back through time? • How are output prices done (by BLS?) • What more specific data is available on rates of return?

8. Muskie School of Public Service Ph.D. Program in Public Policy NorwayIntermediate ConsumptionTwo Problems to be Solved

9. Muskie School of Public Service Ph.D. Program in Public Policy Intermediate Consumption • Exclude basic research of higher education & research institutes sectors • Publishing attracts students, but this may result in something called goodwill or marketing assets, not R&D assets • Private business & research institutes asked about purchases, but can’t tell how much is for R&D input to R&D output

10. Muskie School of Public Service Ph.D. Program in Public Policy Two Problems to be Solved • Large discrepancy between R&D reported in foreign trade statistics & national accounts figures from mid-1990’s to 2004 • When R&D is sold, counted as investment for final user • Benefits from R&D could be received by producer also

11. Muskie School of Public Service Ph.D. Program in Public Policy Questions • Huge increase in market R&D investment from 2004-5 • Negative operating surplus for NACE73 (which produces services of R&D) • Why, including a historical analysis

12. Muskie School of Public Service Ph.D. Program in Public Policy NetherlandsInternational AspectsService Lives

13. Muskie School of Public Service Ph.D. Program in Public Policy International Aspects • Questions about imports, exports (& purchases and sales) need to be in surveys • Problem of transferred R&D within MNCs without $ flows Talked to 8 (5) Multinational Companies (MNCs) The 8 represent 46% of BERD in 2005

14. Muskie School of Public Service Ph.D. Program in Public Policy InternationalSurvey Limitations • Concentration of R&D employees and expenditures suggest some concentration of R&D activities in the Netherlands • R&D exports appear to be under-reported as the 8 MNCs report a small $ volume of R&D exports

15. Muskie School of Public Service Ph.D. Program in Public Policy InternationalTransferal of R&D w/in MNCs • Organization of R&D differed considerably among the 5 MNCs • Businesses using a direct invoice method would greatly benefit creation of R&D accounts

16. Muskie School of Public Service Ph.D. Program in Public Policy Service Lives • Used the average of an unweighted patent life and a value weighted patent life • The resulting average is 12.5 years • Exception chemicals and electro technical manufacturing

17. Muskie School of Public Service Ph.D. Program in Public Policy Questions • Could (would) businesses report on invoice method if asked? • Non-market R&D excluded? • External factors during 1953-69 when rate of growth assumed to be constant?

18. Muskie School of Public Service Ph.D. Program in Public Policy OECD Handbook on Deriving Capital Measures of Intellectual Property RightsTwo “New” Surveys NeededBasic Research IssuePlan of Action

19. Muskie School of Public Service Ph.D. Program in Public Policy Two “New” Surveys Needed • Survey of large MNCs • Non-performers

20. Muskie School of Public Service Ph.D. Program in Public Policy Issue of Basic Research • What to do with it? • Could be large

21. Muskie School of Public Service Ph.D. Program in Public Policy Plan of Action • Foundations exist for the “other” chapters: Software & databases, mineral exploration & evaluation, & entertainment, literary or artistic originals • Target is October 2008 OECD Working Party on National Accounts

22. Muskie School of Public Service Ph.D. Program in Public Policy Questions • Differences in methodologies could increase noncomparability • Other chapters? • Provisions for a second edition?

23. Muskie School of Public Service Ph.D. Program in Public Policy IsraelLagsService LifeComposition of Main TypeContact Person

24. Muskie School of Public Service Ph.D. Program in Public Policy Lags • Gestation • Application

25. Muskie School of Public Service Ph.D. Program in Public Policy Service Lives • How long income is received? • Rate of return varies over time

26. Muskie School of Public Service Ph.D. Program in Public Policy Composition by Main Types • Seemed important • Well-defined by respondents

27. Muskie School of Public Service Ph.D. Program in Public Policy Contact Person • Vice-President of R&D or Chief Technical Officer • Financial Managers?

28. Muskie School of Public Service Ph.D. Program in Public Policy Pilot Study But Seemed to Work Well & Was Valuable

29. Muskie School of Public Service Ph.D. Program in Public Policy Substantial Progress • Complement statistical offices and international organizations • Funders