The Administration's FY 2010 budget proposal includes funding for work on including innovation data in the GDP. For more on this see the Athena Alliance report Frameworks for Measuring Innovation: Initial Approaches, the STPI background paper Measuring Innovation and Intangibles: A Business Perspective and the BEA article "Toward Better Measurement of Innovation and Intangibles."
From the BEA's Congressional Justification briefing:
GDP Innovation Account
Background: All countries acknowledge that business investment in tangible assets as a major contributor to economic activity. In the U.S., they are thought by experts to be fully equal to investment in intangible assets. No country has yet included a comprehensive estimate of business investment in intangible assets in the GDP, yet such investments are increasingly the drivers of economic growth. BEA will expand its 2009 R&D initiative with this broader innovation account, resulting from the Secretary's Advisory Committee on Measuring Innovation in the 21st Century. Building on its work with the National Science Foundation (NSF) measuring R&D, BEA will develop estimates of investments in innovative activities. Working with NSF, BEA produced the first U.S. R&D account in 2006 and is prepared to develop that further with this initiative.
As BEA confronts the challenges of measuring a dynamic and ever-changing economy, there are gaps in the economic statistics BEA produces that must be filled. To more effectively and comprehensively measure the 21st century economy, BEA must build on its development of the R&D satellite account and significantly improve its measures of broader innovative economic activities. Investments in innovation, or knowledge-based activities, are thought to be important engines of economic growth. Yet very little is understood about their role in the economy. Much of the growth that the U.S. economy has experienced in the last ten years is not captured by traditional economic measures--many economists believe that as much as 40 percent of that unexplained growth can be accounted for by knowledge-based activities. Understanding the role of these activities in the economy is critical to accurately measuring and encouraging a strong U.S. economy.
Proposal: Early results from BEA's work on R&D suggest that investments in R&D account for roughly 1/5 of the contribution of knowledge-based activities to economic growth. This new initiative will expand on the R&D statistics BEA has been developing, and will fully research, identify, and quantify the other components of innovation and their contribution to growth. BEA will develop an innovation account that estimates investments in human capital, the design and development of new goods and services, and improved business processes. BEA proposes the following specific products:
• Work with NSF to develop a framework and prototype estimates of investments in innovative activities by the end of FY 2010. BEA will work with the NSF to develop measures of innovation activities that reach beyond the scientific R&D statistics that are currently provided by NSF and have been incorporated into BEA's R&D satellite account. These innovative activities--including important intangibles like new product development and firm-specific training--are thought to be important contributors to economic growth.
• Work with NSF and Census to develop detailed estimates of innovation-related intermediate inputs in FY 2011. In understanding the contributions of R&D to economic growth, it is important to not only measure the uses of R&D by industry, but to understand the inputs into R&D. These inputs, ranging from IT equipment to scientists and engineers, are critical to understanding the sources of R&D's own contributions to growth and in designing public policies to encourage innovation and growth.
• Work with BLS to develop aggregate and industry-level measures of the contributions of investments in innovation total factor productivity. BEA's work on R&D has demonstrated that there are important differences across industries with respect to investment in R&D and the contribution of those investments to overall total factor productivity. Because these differences are also likely to exist for the broader classes of innovative activity, BEA will develop industry-level estimates of innovative investments that will facilitate measurement of individual industries' contributions to economic growth.
• Work with NSF and Census to publish innovation statistics on firm and establishment-level data. BEA will publish innovation statistics based on data on firms as well as establishments to provide more comprehensive estimates of employment in innovation occupations.
This work is part of a $4.5 million new Navigating the 21st Century Economy statistically initiative that also includes better data on energy usage and retirement incomes.
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