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R&D in the National Income and Product Accounts: A First Look at its Effect on GDP, by Barbara M. Fraumeni and Sumiye Okubo
Presented at the Conference on Measuring Capital in the New Economy, sponsored by the NBER/CRIW, April 26-27, 2002, Federal Reserve Board, Washington, D.C.

According to the estimates in this paper, R&D is a significant contributor to economic growth. Over the forty-year period studied, 1961-2000, returns to R&D capital accounted for 10 percent of growth in real GDP. Treating R&D as an investment raises the national savings rate by two percentage points from 19 to 21 percent.

This paper is a preliminary and exploratory examination of the role of R&D in the U.S. economy. It extends the National Income and Product Accounts (NIPA) framework by treating R&D as an investment and imputing a net return to general government capital. Capitalizing R&D investment has a small positive effect on the rate of growth of GDP. There is a significant effect on the distribution of consumption and investment on the product-side and the distribution of property-type income and labor income on the income-side. Most importantly, the partial R&D satellite account developed in this paper increases our understanding of the sources of economic growth.

Last changed: July 18, 2002