The BEA-NSF R&D Satellite Accounts,
2007 Results and Current Challenges
Carol E. Moylan
Bureau of Economic Analysis
OECD Working Party on National Accounts
October4, 2007
Purpose of R&D Satellite Account
 Treat R&D as investment
 R&D creates a future stream of benefits
 Appropriable R&D has the qualities of an economic asset
 Part of broader BEA program to improve
measures of intangibles in national
accounts
 Why R&D?
 Good data on R&D expenditures collected by the
National Science Foundation for over 50 years
 Numerous studies rates of return
 Greater professional agreement on its capitalization
www.bea.gov
2
Main Topics
 What is new in the 2007 estimates.
 Preliminary Results from the
September 2007 release of the R&D
Satellite Account.
 Regional and international issues for
measuring R&D.
 Looking ahead.
www.bea.gov
3
2007 Enhancements
 Satellite account extended two years: 1959-2004.
 R&D adjusted for both unaffiliated and affiliated
trade.
 Purchases of business R&D adjusted from cost basis
to imputed purchase price.
 Adjusted for R&D in software.
 First look at industry-level estimates of R&D
investment (1987-2004).
 Improved measures of prices and depreciation for
R&D.
 R&D adjusted rates of return to broad industry
groups.
 First look at how the international and regional
accounts would implement the capitalization of
R&D.
www.bea.gov
4
R&D Investment as a Percent of Adjusted GDP
1959-2004
3.2
3
Percent
2.8
2.6
2.4
2.2
2
1959
1964
1969
1974
2007 GDP Adjusted for software double-count
www.bea.gov
1979
1984
1989
1994
2007 GDP with software double-counted
1999
2004
2006 Vintage
5
GDP When R&D Treated as Investment
Comparison Between 2006 and 2007 Vintages
www.bea.gov
6
Contributions to Real GDP Growth
www.bea.gov
7
Impact on the Growth and the Industry Share of Growth in Private
Industry Value Added When R&D is Treated as Investment (1995-2004)
www.bea.gov
8
Business R&D's contribution to the Growth Rate of Real GDP
Average Contribution to GDP Growth, 1995-2004
www.bea.gov
9
Rates of Return for Chemical and Computer Industry Groups
Adjusted and Unadjusted for R&D Investment
35
Chemical Industry rate of return,
unadjusted
30
Chemical Industry rate of return,
adjusted for R&D, constant rate of
depreciation
25
20
Chemical Industry rate of return,
adjusted for R&D, accelerating
depreciation
Percent
15
Computer Industry rate of return,
unadjusted
10
Computer Industry rate of return,
adjusted for R&D, constant rate of
depreciation
5
0
1959 1962 1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004
Computer Industry rate of return,
adjusted for R&D, accelerating
depreciation
-5
-10
-15
www.bea.gov
10
Regional & International Issues
 Location of R&D activity:
 Performing states vs. funding states
 Data challenges
 How to distinguish transfers of
ownership of R&D capital from limited
rentals of rights to use R&D capital
 How to treat the sharing of R&D
capital among different parts of a
multinational corporation
www.bea.gov
11
Looking Ahead
 Address the asset boundary/freely available
R&D issue
 Greater industry detail for service sector
R&D
 Depreciation rates for government R&D?
 Slower depreciation for basic?
 Data quality issues
 Better measures of capital inputs
 Company to establishment data
 Quarterly indicators
www.bea.gov
12