Intellectual Property & the Economy

1. Intellectual Property & the Economy J. Steven Landefeld, Director “Intangible Assets in Corporate Reporting and National Accounts” A Policy Framework for Knowledge-Based Capital, OECD/MIT December 3d, 2012,

2. A Broader Measure of Business Intangibles, 1998-2000 Source: Corrado, Carol, Charles Hulten and Daniel Sichel. “Intangible Capital and Economic Growth, “ Working paper as part of the Finance and Economics Discussion Series, Divisions of Research and Statistics and Monetary Affairs, Federal Reserve Board, Washington, D.C. April 2006.

3. The Multi-Factor Productivity Residual • Preliminary results of BEA’s R&D Satellite Account indicate that between 1959-2007, R&D accounted for 5 percent of growth in real GDP. • Between 1995-2007, R&D’s contribution rose to 7 percent • If spillovers (residual unexplained portion of growth) from R&D are – as research suggests- at least as large as the direct returns, R&D may account for 1/6 of total factor productivity growth. Source for table: Corrado, Carol A. and Charles R. Hulten. Innovation Accounting. Paper prepared for the NBER-CRIW Conference, “Measuring Economic Progress and Economic Sustainability,” Cambridge, MA, August 6-8, 2012.

4. Results from BEA’s 2010 R&D Satellite Account: • Treating R&D as investment would have: • 1959-2007: Increased the growth rate of real GDP by .17 percentage point, a 5 percent share of growth • 1995-2007: Increased the growth rate of real GDP by .23 percentage point, a 7 percent share of growth • In comparison, private investment in commercial and other types of structures accounted for just over 2 percent of average real GDP growth • The contribution to average real GDP growth from treating R&D as investment is larger than the contribution from private investment in computers and peripheral equipment

5. Results from BEA’s 2010 R&D Satellite Account: • If spillovers (residual unexplained portion of growth) from R&D are – as research suggests- at least as large as the direct returns, R&D may account for 1/6 of TFP growth • Recognition of R&D as investment would raise private fixed investment by 11.3 percent in 2007 • National saving rate rises by 2.3 percentage points from 14.2 percent to 16.5 percent in 2007

6. Results from BEA’s 2010 R&D Satellite Account: • Information, communication, and technology (ITC) and biotechnology-related industries account for two-thirds of the business sector’s R&D contribution to GDP growth between 1995-2007 • Recognizing R&D as investment boosts the level of state GDP the most in New Mexico (9.2%) and in Maryland (6.2%), on average between 1995-2007 • The value of U.S investments overseas increases by $171 billion or 0.9%, the value of foreign investments in the U.S. increases by $185 billion or 0.9%, for 2007

7. Shares of Private Business Investment in R&D by Industry, 1998 and 2007

8. Nominal Private R&D Investment and Private Fixed Investment in Nonresidential Structures

9. Nominal R&D Investment as a Share of GDP, 1998 and 2007

10. Share of Investment in Entertainment Originals by type, 2010 Misc. Music Theatrical Movies Books Long-Lived Television Total Investment in 2010: $69.7 billion

11. Entertainment Originals Relative to GDP (Nominal)

12. (Nominal Entertainment Investment)/(Total Private Investment)

13. Capital Stock of Entertainment Relative to GDP (Nominal)

14. IP-Related Products and Services Leading the Economy • ICT Services: • Growth • Prices • Productivity • Digitally-enabled international trade: • Exports • Imports • Services balance

15. Percent Changes in Real GDP and ICT-Producing Industries, 2007:Q2-2011:Q4

16. Chain-Type Price Indexes for Real GDPand ICT-Producing Industries, 2007:Q1-2011:Q4

17. Percent Changes in Real Value Added and Labor Productivity, ICT-Producing Industries, 1999-2010 Source: BEA & BLS

18. U.S. Exports of Digitally-Enabled Services

19. U.S. Exports of Digitally-Enabled Services • The share of digitally-enabled services in total exports grew from 45 percent in 1998 to 61 percent in 2010 • For 1998-2010, exports of business, professional, and technical services contributed most to the overall increase in digitally-enabled services exports • The categories with the fastest rates of growth were insurance services and financial services • For 2006-2010, business, professional, and technical services contributed most to the overall increase • The largest increases were for management and consulting services and R&D and testing services

20. U.S. Imports of Digitally-Enabled Services

21. U.S. Imports of Digitally-Enabled Services • The share of digitally-enabled services in total imports grew from 34 percent in 1998 to 56 percent in 2010 • In 2010, there was a surplus on digitally-enabled trade in services of $116 billion out a total surplus in services of $146 billion. • For 1998-2010, business, professional, and technical services and insurance contributed most to the overall increase in digitally-enabled services imports • The categories with the fastest rates of growth were insurance services and business, professional, and technical services

22. Real Value Added & Labor Productivity for Digital-Enabled Service Industries, 1999-2010

23. BEA data priorities • Incorporation of R&D in National Income and Product Accounts (GDP) • Expanded measures of other intangibles, including movies and entertainment, social science R&D, human capital, business models and firm specific R&D • Continued incorporation of improved measures of prices, output, productivity, and investment returns for IT /IP products and services.