1. 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

2. www.bea.gov 2 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

3. www.bea.gov 3 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.

4. www.bea.gov 4 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.

5. www.bea.gov 5 R&D Investment as a Percent of Adjusted GDP 1959-2004

6. www.bea.gov 6 GDP When R&D Treated as Investment Comparison Between 2006 and 2007 Vintages

7. www.bea.gov 7 Contributions to Real GDP Growth

8. www.bea.gov 8 Impact on the Growth and the Industry Share of Growth in Private Industry Value Added When R&D is Treated as Investment (1995-2004)

9. www.bea.gov 9 Business R&D's contribution to the Growth Rate of Real GDP Average Contribution to GDP Growth, 1995-2004

10. www.bea.gov 10 Rates of Return for Chemical and Computer Industry Groups Adjusted and Unadjusted for R&D Investment

11. www.bea.gov 11 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

12. www.bea.gov 12 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