U.S. Government Study Shows that "R&D Spending Adds to GDP, and Rate is Increasing"

Washington D.C., 28 Sep 2006

The Bureau of Economic Analysis (BEA) today released experimental estimates of the effect of intangible assets on the U.S. economy. Specifically, BEA found the nation's gross domestic product (GDP) may actually be higher than is currently calculated and that the impact of research and development (R&D) on the economy appears to be increasing over time. The new data suggest, for example, that in 2002 the U.S. GDP of $10.5 trillion would have been $8 billion higher if this experimental methodology was being used.

When spending on R&D is counted as a capital investment --similar to the way payment for a new factory or software is counted in our national accounts -- current-dollar level GDP rises by an average 2.6% between 1959 and 2002, producing an increase in the 2002 level GDP of $8 billion. Between 1959 and 1995, R&D accounted for 4.5% of real GDP growth – however, it accounted for 6.7% of the growth in real GDP in recent years.

"The Commerce Department and BEA are on the cutting edge of understanding the changes in our economy," said Commerce Secretary Carlos M. Gutierrez.. "Government statistics must evolve to accurately reflect and capture changing aspects of the 21st Century economy. BEA's new data will help our understanding of growth in the American economy. The new data show that our economy may be hundreds of billions of dollars larger than we currently calculate."

With the release of these estimates for R&D, BEA – with the support of the National Science Foundation -- continues its ongoing work to measure the changing components of economic activity. These latest estimates follow BEA's 1999 inclusion of software investment in GDP, the broadest measure of the nation's economic activity. The United States was among the first countries to recognize software as investment in its measures of GDP.

The Department of Commerce continues to work to better understand recent economic activity and to produce a more up-to-date view of the U.S. economy. To that end, in August, Secretary Gutierrez announced an advisory committee comprised of top business leaders and academics. The goal of the Measuring Innovation in the 21st Century Advisory Committee is to consider how best to measure the impact of innovation.

US Department of Commerce
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