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Reviewing the nomenclature for high-technology trade – the sectoral approach

Reviewing the nomenclature for high-technology trade – the sectoral approach. by Alexander Loschky. Current high-tech nomenclature. Two different approaches: Sectoral approach (by economic sectors, ISIC / NACE) Product approach (by product groups, SITC)

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Reviewing the nomenclature for high-technology trade – the sectoral approach

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  1. Reviewing the nomenclature for high-technology trade – the sectoral approach by Alexander Loschky 1

  2. Current high-tech nomenclature Two different approaches: • Sectoral approach (by economic sectors, ISIC / NACE) • Product approach (by product groups, SITC) This presentation concentrates on the sectoral approach. 2

  3. How are high-tech sectors identified? • R&D intensity is used as the sole indicator • Calculating direct and indirect R&D intensities • Direct R&D intensities: • Indirect R&D intensities (R&D expenditure embodied in the intermediate goods used in the production of another sector)Calculation: via Input-Output tables 3

  4. Why reviewing the sectoral high-tech classification? Current nomenclature is relatively old: • 1997: OECD working paper by Thomas Hatzichronoglou (using direct and indirect R&D intensities, but figures date from 1990) • 2005: OECD Handbook on Economic Globalisation Indicators (minor and partial update using only direct R&D intensities) 4

  5. Calculation of indirect R&D intensities (1) Brief description in nine steps: • Conversion of input-output tables (nearest to the year 2000) from national currencies into US-$ (using PPP) • Estimation of missing output data for certain sectors and countries (where possible) with production data • Summing-up of the input-output tables of all countries into a single table 5

  6. Calculation of indirect R&D intensities (2) • Calculation of the direct R&D intensities:= total R&D expenditure of sector Y for all countries / total output in sector Y of all countries • Conversion of the unified input-output table of step 3 into a table of input coefficients (A) • Formation of the Leontief inverse: (I-A)-1 (The Leontief inverse shows the impact of one unit of final demand on the intermediate products.) 6

  7. Calculation of indirect R&D intensities (3) • Transformation of the table into a table of output necessities(showing the amounts of intermediate products needed for one unit of output) • Calculation of the total R&D intensities:Calculation of indirect R&D intensities (of sector Y from each sector X):The output necessities of sector Y from each sector X were multiplied with the respective direct R&D intensities of sectors X.Total R&D intensity of sector Y = direct R&D intensity of sector Y + indirect R&D intensities of Y 7

  8. Calculation of indirect R&D intensities (4) • The total R&D intensities were used to classify the sectors for its technology intensiveness. The threshold used were: R&D intensity… • … below 1.0%: low-tech • … between 1.0% and 2.5%: medium-low-tech • … between 2.5% and 7%: medium high-tech • … higher than 7%: high-tech 8

  9. Results of the calculation – (1) high-tech sectors * Data from the year 1990 and 1980 are taken from Hatzichronoglou (1997). 9

  10. Results of the calculation – (2) medium-high-tech sectors 10

  11. Results of the calculation – (3) medium-low-tech sectors 11

  12. Results of the calculation – (4) low-tech sectors 12

  13. Results – Impact on the high-tech classification: • Almost no changes for the technology classification compared to the last one, based on 1990 data. • The only major change: precision instruments are now high-tech and became the sector with the highest R&D intensity. • But note: The ranking within the high-tech and medium-high-tech groups changed considerably. 13

  14. Outlook (1) • This exercise should be repeated each time when new OECD Input-Output tables become available. • Hopefully country coverage (currently 18 countries) can be extended to even more OECD and non-OECD countries. • Also the classification based on the product approach needs an update (see paper by Florian Eberth, OECD). 14

  15. Outlook (2) – The combined approach Currently trade by high-tech sectors is calculated using correspondence tables (ISIC  SITC). In the future, this could be replaced by using (detailed) sectoral foreign trade data allowing to identify the goods actually traded by high-tech sectors. Thank you! 15

  16. Contact: E-Mail: Alexander.Loschky@jrc.it Phone: +39 0332 78 3077 16

  17. Additional slide: Country coverage • data from 18 countries were used for which R&D intensities could be calculated and for which OECD Input-Output tables were available (compared to 10 countries in 1997) • The countries were: AU, BE, CA, CZ, DE, DK, ES, FI, FR, UK, IE, IT, JP, KR, NL, NO, PL, SE, US(all 18 countries are OECD members) 17

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