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U.S. Economic Growth Bolstered by Research and Development

11/09/2007

The bureau of economic Analysis (BEA) and the National Science Foundation (NSF) recently partnered to produce estimates of how spending on research and development (R&D) affects the nation's gross domestic product (GDP). According to their estimates, GDP would have been nearly 3 percent higher annually between 1959 and 2004 - $284 billion higher in 2004 alone - if R&D spending were treated as investment in the U.S. national income and product accounts. The agencies major findings include the following:
• R&D accounted for 5 percent of real GDP growth between 1959 and 1995, and 7 percent between 1995 and 2004. The 2 percent increase in R&D spending helps explain the pickup in economic growth and productivity since 1995.
• Information, communication, and technology (ICT) and biotech-related industries accounted for two thirds of the business sector's R&D contribution to GDP growth between 1995 and 2004.
• Treating R&D as investment boosted the level of state GDP the most in New Mexico (8.2 percent) and Maryland (6.2 percent) between 1998 and 2002.

This data highlights "the role of R&D spending in improving the competitiveness of industries such as information technology, pharmaceuticals, and other manufacturing industries," said Commerce Secretary Carlos M. Gutierrez. "These new estimates demonstrate the importance of one key source of innovation - research and development - in the U.S. economy. Our data must keep pace with the changing and growing economy, and more improvements are planned."

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