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Comments on The R&D Production Process: Measuring R&D

Comments on The R&D Production Process: Measuring R&D. Kevin J. Stiroh * Federal Reserve Bank of New York December 13, 2006. *These comments are the views of the author only and do not necessarily reflect those of the Federal Reserve System or the Federal Reserve Bank of New York. Outline.

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Comments on The R&D Production Process: Measuring R&D

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  1. Comments onThe R&D Production Process: Measuring R&D Kevin J. Stiroh * Federal Reserve Bank of New York December 13, 2006 *These comments are the views of the author only and do not necessarily reflect those of the Federal Reserve System or the Federal Reserve Bank of New York.

  2. Outline • R&D Issues • Major Comments • Is R&D fundamentally different? • Consistency and transparency • Other Thoughts

  3. BLS (1989) Lags Depreciation Deflator Basic vs. applied research Government vs. private finance Product vs. process Impact of R&D stock on productivity Change in returns over time “The Impact of Research and Development on Productivity Growth”, September 1989, pg. 6. BEA (2006) Scope of R&D investment Assigning ownership Measure of investment Deflator Depreciation Gestation lags Rates of returns “R&D Satellite Account: Preliminary Estimates,” September 2006, pg. 18. R&D Issues

  4. Is R&D Fundamentally Different? • Methodology states no • Familiar variables: I, P, , K, r, etc. • Treat R&D analogously to tangible capital with no explicit spillovers • “Just” measurement problems • Language implies yes • Presumption of spillovers due to public good qualities of R&D • “Measuring R&D” handout • 9/29/06 BEA Press Release • “R&D Satellite Account: Preliminary Estimates” • Apparent disconnect with important implications • Rate of return • Firm-level incentives to invest vs. GDP impact • Some claim IT has spillovers • Would methodology change for tangible capital? • What is burden of proof?

  5. Consistency and Transparency • Will internally consistent industry data be available? • Difficult, but area where biggest value/impact • Particularly for question of spillovers • Data ideally presented on par with aggregates • For fixed assets, BEA has disclaimer about industry/asset breakdown • Will users understand the data and methodology? • More precision about exactly what was done • Example • Identify “Scenario D” as implemented one only on pg. 56 • “Market value” used in various ways • More equations and definitions would help

  6. Other Thoughts • Alternative scenarios in “R&D Satellite Account” are interesting • Highlight sensitivity and key areas for more work • Two outsider’s questions: • How does this compare to what BLS does? • Can BEA sponsor new research on issues such as rates of returns, deflators, and depreciation rates?

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