Transcript Proposal for simplified bridge tables between FM to SNA

Capitalization of R&D in the
national accounts of Israel
The exercise performed to test:
• Feasibility of using existing R&D
statistics as a basis for estimates of
R&D assets in national accounts.
• Implementation of recommendations
developed in the framework of the
work of the Canberra II group during
the last 4 years.
• Examination of the impact of R&D
capitalization on the main national
accounts aggregates.
Bridge tables between R&D statistics
and national accounts
Bridging values needed:
• Acquisition of “extramural” R&D to be
used as input in R&D production
• Consumption of fixed capital owned by
R&D producers and used in R&D
production
• Net operating surplus
• Other taxes on production less other
subsidies on production
Table 1. Summary of simplified bridge table results for Israel
Year
- at NIS million
Gross
Expenditure
on R&D
GERD
Acquisition
from other
R&D
performers
(a)
Capital
expenditure
Consumption
of fixed
capital
Net
operating
surplus
R&D
domestic
output
( )
( )
( )
( )
( )
( )=( )+( )( )+( )+( )
Total
,
,
,
,
,
,
Business
,
,
,
,
,
Government
,
,
,
,
Non-profit
Institutions
Higher
Education
(a) In R&D statistics named extramural R&D. GERD includes only intramural R&D.
Acquisition of R&D by NPI's and Higher Education assumed to be negligible
Estimates of R&D capital formation
• Supply and use of R&D output using
the data from bridge tables.
• Distinction between market and nonmarket R&D.
• Separation of exports and imports of
R&D proved to be important.
• Constant price estimates prepared in
satellite accounts since 1989.
Estimates of R&D capital formation (contd.)
• Time lag between the start of R&D
projects and the use of the finalized
R&D - gestation lag and application
lag – assumed to be 2 years, basing
on venture capital funds sources.
• Unfinished R&D defined as stocks of
work in progress, considering the
high share of R&D exports in Israel .
Table 2. Supply and Use of R&D assuming R&D capitalized, percent of GDP
Supply
Use
Gross fixed
capital
formation of
Non-Market
producers
Intermediate
consumption
and increase
in work in
progress on
R&D
Exports
Total
Domestic
production
Imports of
R&D
Total
Gross fixed
capital
formation
Market
producers
1991
2.4
0.2
2.5
0.9
1.0
0.2
0.5
2.5
1992
2.4
0.2
2.6
0.8
0.9
0.3
0.5
2.6
1993
2.5
0.2
2.7
1.0
1.0
0.3
0.5
2.7
1994
2.6
0.2
2.7
1.0
1.0
0.3
0.5
2.7
1995
2.6
0.2
2.8
1.1
1.0
0.3
0.5
2.8
1996
2.8
0.2
3.0
1.2
1.0
0.3
0.5
3.0
1997
3.1
0.2
3.2
1.2
1.0
0.4
0.5
3.2
1998
3.2
0.2
3.4
1.3
1.0
0.4
0.7
3.4
1999
4.0
0.2
4.2
1.6
1.0
0.9
0.8
4.2
2000
5.1
0.2
5.3
1.3
1.0
1.8
1.3
5.3
2001
5.4
0.2
5.6
1.8
1.0
1.6
1.1
5.6
2002
5.5
0.2
5.8
2.8
1.2
0.5
1.2
5.8
2003
5.2
0.2
5.4
2.6
1.2
0.2
1.4
5.4
2004
5.1
0.2
5.4
2.0
1.2
0.3
1.9
5.4
2005
5.5
0.2
5.7
2.2
1.1
0.7
1.6
5.7
(a) Excluding defence R&D
Uses of R&D
at 2000 prices
30000
25000
15000
10000
5000
0
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
GFCF Market producers
GFCF Non-Market producers
IC and increase in work in progress on R&D
Exports
2004
2005
Million NIS
20000
Estimates of service lives of R&D
• Original intention to estimate service
lives of R&D in Israel using existing
panel data was abandoned due to lack
of some important variables.
• Instead, an average depreciation rate of
0.15, derived from the paper by Ballester,
Garcia-Ayuso, Livnat (2000).
• In future work it will be necessary to
improve the service life estimates, i.a., by
performing industry depreciation rates.
Estimates of R&D capital stocks
Percent of total capital stocks (a)
Private
Higher
non-profit education
institution
(nons
market)
Governt.
Total nonBusiness
market
Total
1998
1.0
4.9
1.4
7.2
8.5
15.7
1999
1.0
4.7
1.3
7.0
8.7
15.7
2000
1.0
4.5
1.3
6.8
9.2
16.0
2001
1.0
4.3
1.3
6.6
9.1
15.7
2002
1.0
4.2
1.3
6.5
9.4
16.0
2003
1.0
4.2
1.4
6.6
10.7
17.3
2004
1.0
4.2
1.4
6.7
11.9
18.6
2005
1.0
4.3
1.5
6.8
12.4
19.2
(a) Excluding stocks of dwellings
Net impact of capitalization of market
R&D on GDP
Percent of GDP
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
Gross fixed
capital
formation
Market
producers
1.1
1.2
1.2
1.3
1.6
1.3
1.8
2.8
2.6
2.0
2.2
Increase in
work in
progress on
market R&D
Less R&D in
start-ups
already
included as
work in
progress
Impact of
capitalization
of R&D
0.2
0.3
0.4
0.4
0.5
1.3
1.2
0.1
-0.3
-0.1
0.3
0.1
0.3
0.4
0.5
1.0
1.4
2.1
1.4
0.8
0.7
1.1
1.2
1.1
1.2
1.2
1.1
1.2
0.9
1.5
1.5
1.2
1.5
Net impact of capitalization of market and
non-market R&D on GDP
Percent of GDP
Gross
fixed
capital
formation
Market
and Nonmarket
producers
Less R&D of
non-market
Depreciation Increase
producers
of R&D of
in work in
already
Non-market
progress
included as
producers
on R&D
consumption
expenditure
Less R&D
in startups
already
included
as work
in
progress
Net impact
on GDP
1
2
3
4
5
6=1-2+3+4-5
1998
2.3
1.0
0.9
0.5
0.5
2.2
1999
2.6
1.1
1.0
0.6
1.0
2.1
2000
2.2
1.1
0.9
1.4
1.4
2.1
2001
2.9
1.1
1.0
1.3
2.1
1.9
2002
4.0
1.2
1.1
0.1
1.4
2.6
2003
3.8
1.3
1.1
-0.2
0.8
2.7
2004
3.2
1.2
1.1
-0.1
0.7
2.3
2005
3.3
1.1
1.1
0.3
1.1
2.6
Capital formation compared to
depreciation
• Net GFCF obtained is continuously positive,
since the depreciation is lower than the fixed
capital formation in most years, due to
relatively fast growth of the GFCF over the
years.
• However, the actual impact of R&D
capitalization on NDP and NNI is different,
since other changes to registration of output
for final use have also been made.
Net fixed capital formation in R&D
compared to NNI at market prices
Percent of NNI
GFCF in
R&D by
Market
and Nonmarket
producers
1998
Less
Depreciati
on of R&D
R&D net
fixed capital
formation
R&D
Actual
addition to
GDP less
depreciation
of R&D
2.8
2.4
0.4
0.3
1999
3.2
2.7
0.5
-0.1
2000
2.8
2.7
0.1
-0.1
2001
3.5
3.0
0.6
-0.6
2002
5.1
3.3
1.8
-0.1
2003
4.8
3.5
1.3
-0.2
2004
4.0
3.7
0.3
-0.8
2005
4.1
3.8
0.3
-0.7
Conclusions from the exercise
• Feasible to integrate R&D statistics in
national accounts, and obtain R&D
capital formation and stocks.
• The impact of capitalizing market R&D
amounts to about 1.5% of GDP
• The impact of non-market R&D is also
significant - about 1.0% of GDP.
Conclusions from the exercise (contd.)
• The treatment of non-market R&D in this
way is consistent with the treatment of
roads and other infrastructure in the
current SNA.
• However, it is important to show such
R&D separately, since it is used by other
sectors.
• Although the individual use mostly can
not be identified, the scope of nonmarket R&D used by the economy as a
whole is of importance.
Conclusions from the exercise (contd.)
• The compilation of bridge tables and
R&D capitalization process would very
likely lead to an improvement of R&D
estimates in the national accounts.
• Improvement seems to be necessary,
whether R&D is capitalized or not. There
is a need for separate R&D accounts of a
good quality in the SNA framework for
economic analysis's and decisions.