# Presentation: 243533

## R&D Productivity Accounts

- Barbara M. Fraumeni
- Muskie School of Public Service, University of Southern Maine
- & the National Bureau of Economic Research
- Aspects of Measuring R&D Capital Services and the Production Account
- Washington, DC
- December 13, 2006

**R&D Productivity Accounts**

## Not the Usual GDP Contribution

**Ph.D. Program in Public Policy**

**Not the Usual GDP Contribution**
**Productivity accounts are a different way of looking at contribution to GDP**
**Require capital services and a full set of productivity (production)** **accounts**
**NOT EASY**

## Two Contributions to GDP Growth

**Ph.D. Program in Public Policy**

**Two Contributions to GDP Growth**
**Contribution of R&D investment**
**Contribution of R&D capital input**

## Part of a BEA/BLS Project?

**Ph.D. Program in Public Policy**

**Part of a BEA/BLS Project?**
**BLS produces productivity accounts with capital services**
**NIPA income (and R&D) accounts don’t have all the needed pieces yet**
**Sveikhauskas work is not fully integrated into BLS productivity accounts**

## Issues

**Ph.D. Program in Public Policy**

**Issues**
**Difficulty of assembling productivity accounts components**
**Determining rates of return**
**R&D impacting on inputs or productivity change, or both?**

## Assembling Productivity Accounts Components 

**Ph.D. Program in Public Policy**

**Assembling Productivity Accounts Components**** **
**Need capital services and labor services**
**Nominal and constant dollars**
**Stocks and employee counts are inadequate proxies**
**	****	****WORK WITH BLS**

## Assembling Productivity Accounts Components (cont.)

**Ph.D. Program in Public Policy**

**Assembling Productivity Accounts Components (cont.)**
**Need to do it for all assets, not just R&D**
**Why? **
**Determining the amount of total capital compensation (and labor compensation)**
**Mixed income is a problem**
**Do the results make sense across assets (and industries)?**
**More tax complications for other assets**
** ****WORK WITH BLS**

## Net Rates of Return Equal Across All Assets

**Ph.D. Program in Public Policy**

**Net Rates of Return Equal Across All Assets**
**Endogenous vs. exogenous?**
**Overall**
**R&D, unknown total**
**Typical endogenous ROR calculation**
**Estimates corporate vs. noncorporate capital compensation**
**May assume self-employed wage rates**
**Needs to split mixed income**
**Suggests need for an asset approach for R&D**

## Net Rates of Return NOT Equal Across All Assets

**Ph.D. Program in Public Policy**

**Net Rates of Return NOT Equal Across All Assets**
**Passing the “smell” test**
**Perfect mobility**
**Extra returns competed away instantaneously**
**Gross return = net return plus depreciation**
**Identifying (private) net return vs. depreciation**
**Netting out spillovers**
**Need to assume one or the other**

## R&D’s Impact

**Ph.D. Program in Public Policy**

**R&D’s Impact**
**BLS footnote on R&D**
**R&D may impact on inputs**
**R&D may impact on productivity**
**Or some of both**
**Difficult for BEA to sidestep this issue in a productivity account**

## Conclusion

**Ph.D. Program in Public Policy**

**Conclusion**
**Productivity accounts including R&D should be constructed**
**R&D is more complicated than most other included assets, start simple, complicate later**
**Do this as part of a joint BEA/BLS project to create productivity accounts at the aggregate and sectoral levels**

## Missing Discussions

**Ph.D. Program in Public Policy**

**Missing Discussions**
**What is appropriate for a satellite account but not for GDP accounts**
**Freely available R&D**
**Software**
**Imports & exports and other international considerations**
**Status of SNA revision proposals**