Transcript Discussion of Francisco Moris’ U.S. International Trade in

Discussion of Francisco Moris’
U.S. International Trade in R&DRelated Services and a
Transactions-Based Profile of
Business R&D’
Wolfgang Keller,
University of Colorado
and NBER
Overview
• Shows recent trends in US trade in
research, development, and testing
(RDT) services
• Develops a new methodology,
transactions-based R&D accounting, for
tracking international R&D that
emphasizes ‘use’ of R&D results
• Applies the new framework to 2003 US
data from NSF and BEA
Why is this important?
• Because the US trade surplus in RDT
services is primarily due to exports by
foreign-owned multinational affiliates ?
• New indicators on how new technology
is used and diffused internationally for
current levels of integration
• R&D creates new technology, thereby
raising productivity – and that is the
critical determinant of per-capita
income
Sources of Income Differences
Production function: Y = A*F(K,H,L)
Two ways of raising output:
1.Higher effort and investment
– More hours worked: ΔL
– More investment: ΔK, ΔH
2.Higher efficiency
– More output for given L, K, and H: ΔA
Output Differences: the Breakdown
•Typical example:
U.S. output per
worker in the year
1985 is 35 times as
large as that of Niger
Output per Worker
difference
Capital
difference
1.5
x
Human
capital
difference
Productivity
difference
3.1
x
Total
35
Source: Hall and Jones 1999
7.7
=
But: not much is known yet about the ‘A’ factor
• Typically, what we know is
– Not based on data, but on constructed or
otherwise estimated data
– Only correlations of observables with the
constructed ‘A’ factor
• Some indications that ‘A’ is affected by
technology activity both at home and
abroad
• There is a great need to
measure and quantify technology
creation and linkages
Research, Development, and Testing Services
US Private Services Exports 2001
Operational leasing
2%
Other business,
professional, and technical
services
13%
Travel
27%
Research and development
and testing services
2%
Management and consulting
services
1%
Computer and information
services
2%
Other services
6%
Passenger fares
6%
Film and television tape
rentals
3%
Other transportation
10%
Telecommunications
2%
Total: $ 273 billion
Insurance services
1%
Financial services
7%
Education
4%
Royalties and license fees
14%
RDT: $ 6.7 billion
Affiliated: $ 5.7 billion
Unaffiliated: $ 1.0 billion
US: trade surplus in Business, Professional , and
Technical Services (BPT) and RDT Services
US is net exporter of RDT largely through
affiliated trade…
Millions of current $ US
Total
Unaffiliated
Affiliated
And that comes largely from foreign-owned
affiliates to their multinational parents
US RDT trade surplus through exports by
foreign-owned affiliates –does this matter?
• Quantitatively, how large are these net
technology transfers from the US to other
countries?
– Not that large: 1.5% of US BERD in 2003
• Are there policy implications for the US?
• Technology sourcing, ‘Listening-post FDI’
– van Reenen et al., forthcoming American Economic
Review
• International technology linkages go both
ways. FDI coming into the US has a major
positive effect on US firm productivity
– Keller and Yeaple (2005)
Who is the ultimate beneficiary of US R&D?
• Current R&D expenditure statistics
focus on two dimensions (Frascati
Manual)
– R&D Performer
– R&D Funder
• System of National Accounts - based
statistics would consider the R&D ‘user’
• If market transactions on R&D services
are observed, we know their value, not
only the costs of R&D
Relation to new US R&D Satellite Accounts
Frascati Manual (FM)
R&D expenditures
-Exports of RDT
-Imports of RDT
SNA
Output
Exports and imports
of R&D output
Capital formation
See Robbins (2006)
The three faces of R&D
R&D
Funding
Production
Use/Exchange
Table 4: A New Transactions View of R&D
Transactions 2 to 5 are market-based
R&D in the closed economy
Gross Expend. R&D used
Note: [2] = [4], [3] = [5]
Trade in R&D services in open economy
•R&D service exports
of one country are the
R&D service imports of
another: [2] + [3] =
[4’] + [5’] (assumes no intracountry R&D trade)
Application to 2003 US Business R&D
[1]+[6]+[4]+[5]
[1]+[6]
+[2]+[3]
Units: Billion current $ US
Initial questions: domestic R&D trade
• In which industries is there a lot of R&D
service trade?
• What are the characteristics of firms
that buy and sell R&D services
domestically?
• How large are R&D purchases and sales,
relative to own-account R&D in the
closed economy?
International R&D service trade
• What are the characteristics of firms
that export or import R&D services?
With which other countries?
• Does R&D service trade decline with
distance, domestically as well as
internationally, like most other trade
does?
Technology diffusion: market-based and nonmarket based
R&D Spillovers, R&D Trade, and Technology Licensing:
US Exports in 2001 (billion $)
6.75
1%
40.70
4%
1001.54
95%
R&D Spillovers provided by US
R&D&T Services Exports by US
Receipts of Royalties and License Fees by US
Why look at Multinationals:
FDI and the Internalization Question
• Internalization : The hierarchical
structure between MNE parent and
affiliate overcomes market failures –
internalize externalities--in the market
for technological knowledge
-> that is a motive for FDI, versus
technology sale or licensing
Studying technology diffusion inside and
outside the MNE
• Comparing RDT service trade between
– affiliated and
– unaffiliated parties
• Are there systematic differences in
these patterns?
• If so, does transfer pricing play a role?
• To the extent that it does not, what
accounts for the systematic differences?
Conclusion
• The paper provides the methodological
basis for new research on technology
linkages between countries
– Will improve understanding of international
technology diffusion & income differences
• Current efforts should also put emphasis
on royalty and licensing payments
• And: how can a more informed analysis
of market-based linkages shed new light
also on spillover relations?