Treatment of International Research and Development As Investment Issues and Estimates

Publisher Marketing: In recent years, the Bureau of Economic Analysis (BEA) has initiated a long-term effort to provide more extensive economic data and analysis about research and development (R&D) activity and its effects on the economy. A major part of this effort has been the development, in conjunction with the National Science Foundation (NSF), of the R&D satellite account (R&DSA), a project that examines the effects on BEA's economic accounts of capitalizing R&D, that is, treating the knowledge created by R&D as a long-lived, intangible asset that contributes to future production in much the same manner as physical (tangible) capital. Under such an approach, spending on R&D is treated as investment, rather than as an expense as is current practice in BEA's accounts. The R&DSA was first released last year. Revised and extended estimates-the 2007 R&DSA-have been released recently. This paper, although not wholly integrated with the central R&DSA work, is related to that work. Its purpose is to examine various international aspects of the R&DSA and, more generally, the effects of treating R&D as investment throughout BEA's international accounts. This paper and one on regional effects constitute 2007 R&DSA background papers.