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

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.

3 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 How are high-tech sectors identified?

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)

5 Calculation of indirect R&D intensities (1) Brief description in nine steps: 1.Conversion of input-output tables (nearest to the year 2000) from national currencies into US-$ (using PPP) 2.Estimation of missing output data for certain sectors and countries (where possible) with production data 3.Summing-up of the input-output tables of all countries into a single table

6 Calculation of indirect R&D intensities (2) 4.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 5.Conversion of the unified input-output table of step 3 into a table of input coefficients (A) 6.Formation of the Leontief inverse: (I-A) -1 (The Leontief inverse shows the impact of one unit of final demand on the intermediate products.)

7 Calculation of indirect R&D intensities (3) 7.Transformation of the table into a table of output necessities (showing the amounts of intermediate products needed for one unit of output) 8.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

8 Calculation of indirect R&D intensities (4) 9.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

9 Results of the calculation – (1) high-tech sectors Classification of industries based on technology intensity Nomenclature *1980* IO sector / Sector description ISIC Rev. 3 Ra nk dir.+ indir. R&D dir. R&D Ra nk dir.+ indir. R&Ddir. R&D Ra nk dir.+ indir. R&D dir. R&D 20 Medical, precision & optical instruments %10.53%56.55%5.10%54.69%3.61% 10 Pharmaceuticals %10.04%311.35%10.47%48.37%7.62% 19 Radio, television & communication equipment %8.32%49.40%8.03%39.33%8.35% 17 Office, accounting & computing machinery %7.91%214.37%11.46%211.19%9.00% 23 Aircraft & spacecraft %8.21%117.30%14.98%116.06%14.13% * Data from the year 1990 and 1980 are taken from Hatzichronoglou (1997).

10 Results of the calculation – (2) medium-high-tech sectors Classification of industries based on technology intensity Nomenclature *1980* IO sector / Sector description ISIC Rev. 3 Ra nk dir.+ indir. R&D dir. R&D Ra nk dir.+ indir. R&D dir. R&D Ra nk dir.+ indir. R&D dir. R&D 24 Railroad equipment & transport equip nec %3.68%93.03%1.58%111.69%0.98% 21 Motor vehicles, trailers & semi- trailers %3.30%64.44%3.41%73.68%2.81% 18 Electrical machinery & apparatus, nec %2.65%73.96%2.81%64.25%3.48% 16 Machinery & equipment, nec %2.13%102.58%1.74%102.00%1.32% 09 Chemicals excluding pharmaceuticals 24 excl %2.38%83.84%3.20%82.67%2.15% 11 Rubber & plastics products %1.03%112.47%1.07%92.20%1.08%

11 Results of the calculation – (3) medium-low-tech sectors Classification of industries based on technology intensity Nomenclature *1980* IO sector / Sector description ISIC Rev. 3 Ra nk dir.+ indir. R&D dir. R&D Ra nk dir.+ indir. R&D dir. R&D Ra nk dir.+ indir. R&D dir. R&D 11 Rubber & plastics products %1.03%112.47%1.07%92.20%1.08% 22 Building & repairing of ships & boats %0.73%122.21%0.74%131.42%0.39% 14 Non-ferrous metals %0.80%141.57%0.93%161.04%0.54% 12 Other non-metallic mineral products %0.80%151.44%0.93%141.10%0.66% 25 Manufacturing nec; recycling (include Furniture) %0.46%131.76%0.63%121.45%0.79% 15 Fabricated metal products, except machinery & equipment %0.54%161.35%0.63%151.06%0.45% 13 Iron & steel %0.53%181.10%0.64%180.78%0.45% 08 Coke, refined petroleum products and nuclear fuel %0.39%171.33%0.96%170.80%0.58%

12 Results of the calculation – (4) low-tech sectors Classification of industries based on technology intensity Nomenclature *1980* IO sector / Sector description ISIC Rev. 3 Ra nk dir.+ indir. R&D dir. R&D Ra nk dir.+ indir. R&D dir. R&D Ra nk dir.+ indir. R&D dir. R&D 07 Pulp, paper, paper products, printing and publishing %0.40%190.88%0.31%190.68%0.23% 05 Textiles, textile products, leather and footwear %0.29%200.78%0.23%200.56%0.13% 04 Food products, beverages and tobacco %0.34%210.73%0.34%200.56%0.14% 06 Wood and products of wood and cork %0.21%220.65%0.18%220.55%0.14%

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.

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).

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!

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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)