㌔＿

N IST EP R E PO R T N O．31

DCvelopmentofR＆DPurchasingPowerParities

（Summary）

Mareh1994

TakaoKIBA，ItsuoSAKUMAandJunichiKIKUCHI

ThirdPolicy－OrientedResearchGroup

Na60nalhstituteofScienceandTechnologyPolicy（NISTEP）

‰ienceandTechn0logyAgenCy

Summ ary　and　でrans la t⊥on

O f Jap ane se V ersion

Contents

1．Introduction　　　　…………………………………‥　1

2．The need to develop R＆D purchasing power parities　……・2

2．1　A comparison ofJapan，s R＆D expenditure structure

and GDP expenditure

2．2　　Earlier research on R＆D PPPs

3．Calculations of R＆D purchasing power parities　…………10

3．1　Bas⊥C　⊥dea

3．2　　Calculation method

3・2．1　Weighted average of purchasing power parities

3．2．2　Assumptions regarding pricelevels for R＆D

expenditureitems

3．2．3　　Calculation formula

3．3　Pricelevels for personnel，raW material，and

miscellaneous expenditure

3・3・l Personnel expenditure for researchers

3．3．2　Raw material and miscellaneous expenditure

3．4　Calculation results

4・Considerationin using R＆D purchasing power parities　…‥　28

4・1　The relationship between R＆D PPP and R＆D expendi－

ture overseas

5．　Conclusions

6・　Points requiring further discussion　…………………　33

7．　F⊥nal comments　　　　　………………………………・　34

8・　B⊥bl⊥ography

1．lntroduCtion

The expanding world－Wide competitionin research and development

is giVing rise to numerous attempts bY a range Of organizations

to compare research and development expenditure among various

COuntries．To make more accurateinternational comparisons of

research and development（R＆D）expenditure．anindexis needed

that will allow direct comparisons of the amounts of g00ds and

SerVices that can actuallY be purchased with the R＆D expenditure

Of each country・（Notel）We wouldlike to advocate the develop－

ment of purchasing power parities applicable to R＆D expenditure

（hereafter，HR＆D PPPs”）as a currency conversion rate that can

Perform this function．

Conversion based on currency exchange rates does not show the

actual purchasing power of a particular country′s R＆D expendi－

ture′　and OECD and other purchasing power parities（hereafter，

”Znternational Comparison Program（ZCP）PPPs’’）are calculated on

bases that differ from the goods and services usedin R＆D．（Note

2）

We have studied R＆D expenditureitems and the pricelevels of

theseitems andin this report have pointed out problems with

appIYing　＝CP PPPs to R＆D expenditure′　COmPleting trial calcula－

tions of R＆D PPPs for　6　countries，includingJapan．Itis essen－

tialin calculating R＆D PPP to analyze R＆D expenditureitems and

match PPPs to theseitems；We have attempted here as detailed an

analYSis as possible usinginput－OutPut tables and other sources・

We have also added some comments on the use of R＆D PPPs．

（Notel）IncomparingR＆Dexpenditure，WeShouldtakenoteofthediffere一ccSamOngCOuntriesinwhattheymeanbyresearchanddevelopmentandwhatitcovers．AndwhencomparlngthemonetaryamountofR＆D

expenditureoverasetperiod，WemuStalsoconsiderdifferencesintheprlCeinflationrateamongcountries・WeshallnottouchonthesepolntSinthisreport・

（Note2）OECDandotherPPPsarecalcula［edoneitheranICPbaseandanSNAbase．Thevaluesusedhere

arecalculatedonanICPbase．

OECDPPPsarecalculatedeveryfiveyears，themostrecentcalculationsbeingin1990・Inordertoutilizea

numberofstatisticalnguresbesidesthePPPs，Wehaveusedthe1985calculations（GearyKhamisMethod）thatallowustouseallofthese．

2・Theneedtodevel0PR＆DpurchasingPOWerParities

Japan，s l993　white paper on science and techn010gY COntained

graphs showing R＆D expenditure bY the ma〕Orindustrialized coun－

tries calculated usingICP PPPs（Figurel）・　Comparing figures

for the United States andJapan，We Can See that between1970　and

1986　R＆D expenditure rose much more sharplyin the United States

thaninJapan．　On anICP PPP conversion′　R＆D expenditure by the

United Statesin1992　was about　2．4　times as great as that bY

Japan（Japan’s R＆D expenditureis for the natural sciences only）・

On an exchange rate basis，however，itis only aboutl．6　times as

great・

PPPs have been developed by OECD and such organizations as a

CurrenCY COnVerSion rate that adjusts pricelevel differences

between countries・　These PPPs，however，Were developed for the

PurPOSe Of comparing the GDPs of different countries and hence

are not necessarilY aPPlicablein all other cases．New PPPs that

address the special characteristics of R＆D are needed′　then，tO

replace existing PPPs based on overall GDP．

2．1．AcomparisonofJapan’sR＆DexpenditurestructureandGDPexpenditure

In the Geary Khamis Method′　the PPP values forindividual GDP

expenditure items impact on the PPP value for overall GDP in

PrOPOrtion to the weight of these items within overall GDP・

［1日2］　In1985　final consumption bY the private sector account車

ed for about　60％　of GDPin each countrY，and accordinglY，the

Pricelevels of consumption g00ds greatlyinfluence the calcula－

tion of PPPs ag‘ainst GDP．

Itis necessary′in considering the validitY Of applying PPPs to

R＆D expenditure′　tO eXamine the correspondence of R＆D expenditure

items to GDP expenditureitems．　The Report of the SurveY On

Research and Development bY the Management and C00rdination

Agency（hereafter，一一Japan，s R＆D statistics”）［3］breaks down R＆D

expenditureinJapaninto sixitems，including personnel expendi－

ture′　raW material expenditure′　and expenditure for tangible

fixed assets purchase（PurChase of machinerY，instruments and

equipment；1and and buildings；and other tangible fixed assets）・

We have analYZed the breakdown of these expenditures giVenin

2

Figurel YenConversionofR＆DExpenditureinMajorCountriesBasedonExchangeRateandPurchasingPowerParities

IMF Exchange Rate

Trllli．0n yen

二二二二二＝二l＝－

′一　　　　　　L

ヽ’

Prance u．K．

1970‾757677737980818283648586875889909192（軋scal Year）

P．p．p．

Trllllon yen35

30

25

20

15

10

5

0

U．S．A．

ェ一㌔廿

．ご㌻ご

1970‾757577787980313283348536875859909192（Piscal Year）

Source：White Paper on Science＆TechnologYin1993

3

Japan’s R＆D statistics for1985，COmParing their structure to

that of GDP expenditureitems established bY ZCP on which PPP

Calculations are based；the results are shownin Figure　2．

Among the R＆D expenditureitems，i．e．，PerSOnnel expenditure′

expenditure for tangible fixed assets，and miscellaneous expendi－

ture′　are SOme that directly correspond to expenditureitemsin

ICP PPPs，though there are some ma］Or differences between R＆D

and GDP expenditureitemSin the weight of theseitemsin the

Wh01e・　Conversely′　SOme Of theitemsincludedin calculatingICP

PPPs′　SuCh as manY that fall under the headings，individual final

COnSumPtion，（f00d，Clothing，medical care′　etc．）or，residential

building‘COnStruCtion，and　′civil engineering，，have almost no

equivalent among R＆D expenditureitems・R＆D expenditureitems and

ICP PPP expenditureitems being so different structurally，the

＝CP，s GDP PPPs do not accuratelY reflect international price

levels for R＆D expenditure・Individual R＆D expenditureitems are

discussed below．

（1）Personnel expenditure

Personnel expenditure accounts for　42％　of R＆D expenditure・　Only

a few of the GDP final expenditureitems usedin calculatingICP

PPPs，however，are related to personnel expenditure′　e・g・，

governmental and education compensation of employees（including

not only researchers but al10ther occupations）′　and the weight

Of theseitems is small．　Hence′　thereis a significant dif

ferencein the rati0　0f personnel expenditure to total expendi－

ture between these two・（Note　3）

（2）Raw material expenditure

Raw material expenditureis defined byJapan，s R＆D statistics to

be expenditure for raw materials，PartS，eXPerimental products′

and some tYPeS Of machinery・　Raw material expenditure accounts

for around18％　of total R＆D expenditure・AsICP PPPs focus pri－

marilY On the prices of final consumption goods andinvested

g00ds，it appears doubtful that they adequately reflect price

levels for raw material expenditure・

（3）Expenditure for tangible fixed assets purchase

Expenditure for tangible fixed assets purchase can be broken down

into machinery′instruments and equipment；1and and buildings；

and other assets．

4

Figure2　BreakdownsofJapan’sR＆DExpenditureandGDP

（The rati00f value of eachitem to the amount of

national R＆D expenditure and GDP based onICP）

R＆Dexpenditures

GDPbreakdowns

Personnel

expendituI℃

鮎uCadαlal

Mi虹cllaneous　関心　C叩山）nandscrvic朗　　　　Ofcmployce

5

Privale丘nd

COnSumptl0n

63．0％

（a）’Machinery′instruments and equipment，accounted for11．8％　of

Japan’s R＆D expenditure′　Whileits corresponding GDPitem′

HmachinerY and equiPment一一　within GDP gross fixed capital forma－

tionr accounted forlO・6％　ofJapan，s nominal GDP・

（b）’Land and buildings，includes expenditure for construction of

researchinstitutions and corresponds to　′non－reSidential build－

ing construction，expenditure within GDP gross fixed capital

format土on．

（C）ConverselY，the fields of，residential building construction，

and’civil engineering，，Which areincludedin calculations for

PPPs concerning fixed assets，havelittle connection with R＆D．

（d）Expenditure for tangible fixed assets purchase generallY

COrreSPOnds to GDP gross fixed capital formation・　Expenditure

for tangible fixed assets purchase accounts for18．1％　of R＆D

expenditure′　While gross fixed capital formation accounts for

27・7％　ofJapan，s GDP・　The percentage of fixed asset expenditure

Within R＆D expenditure′　therefore′is lower than theICP PPP

Calculat⊥on．

（4）Miscellaneous expenditure

’Ⅱiscellaneous expenditure，includes expenditure on suchitems as

light and heat，COmmunication，tranSPOrt，b00ks and magazines′

land rentr and conferences・　R＆D input structure can be

underst00d from theinput一〇utput table by dividing theseinvest－

mentsinto　′raw material expenditure，and　′miscellaneous expendi胃

ture’・　Corresponding closest to，miscellaneous expenditure′

among theintermediateinputslistedinJapan，S1985input－OutPut

table and being of sizable amounts are　′publishing and printing，，

’real estate agency′，′electrical power，，and　′Communication，．

Severalitems within　′miscellaneous expenditure′　correspond to

individual final consumption・　On the other handJ GDP expenditure

items such as f00d．clothing，medical care′　education，and enter－

tainment are rarelY uSedin R＆D．

（Note3）The190expenditureitemsintheOECDPPPsincludegovernmentalandeducationalcompensation

Ofemployees・ThetotalweightofthesetwoGDPexpenditureitemsinoverallGDPexpenditureisabou［7％．

6

2．2　EarJierresearchonR＆D PPPs

Our next taskis to estimate R＆D PPPs．We have sought out earlier

research on this subject，but there are verY few examples of

research attempting to establish PPPs for R＆D expenditure・（Note

4）

（l）In A・S・MacDonald′S1973　paper，R＆D expenditure was broken

downint0　3　component expenditureitems　胃－labor，OPerating

COStS，and machinerY and equiPment　…　and a PPP forindividual

COuntries was found for each expenditureitem；a Weighted average

Of these Yielded an，R＆D expenditure exchange rate，for each

COuntry・［4］In order to secure transitivitY amOng COuntries，in

the weighted average calculation，a Simple averaged figure of the

rati0　0f the expenditureitems to the wh01e national R＆D expendi－

ture of several selected countries was used as the common weight

Of expenditureitemsin anY COuntries．　As PPPs for each expendi－

tureitems′　the unit cost by weight of R＆D machinery was used for

’machinerY and equiPment，．The averageindividual wages for

Skilled engineerS and scientists′　teChnicians and supporting

Staff were weighted by the average v01ume（average number of

PerSOnnel）in each country．　The weig‘hted average was used as the

PPP for’labor cost，・（Note5）

This was perhaps the first time that a multinational R＆D PPP had

been calculated．

（2）F0110wing MacDonald′s research，an attempt WaS made to cal－

Culate an R＆D exchange ratein a1979　0ECD report．［5］　Here

MacDonald’sidea for an averag‘e basket for each countrY WaS again

used，but the method010gY SOmeWhat revised．　The MacDonald Method

requires price and v01ume data for g‘00ds usedin R＆D′　andin

light of the difficultY Of obtaining such data，the　工CP一generated

PPPs（1975　EEC calculation）were used as PPPs for component

expenditureitems．

（Note4）Ourresearchinstituteputtogetherin1992areportfromthesameperSPeCtiveasthepresentreport・［8］Earlierresearchincludedthatdoneinthe1950sbytheU．K．’sFreemanandwhichwasmentionedin

theFrascatiManual・Asfaraswecoulddetermineafterathoroughsearch，reSearChotherthantha［described

in［hisreportisnottobefound．

（Note5）MacDonald’scalculationmethod，tOO，COnfor誓StOOrthodoxpriceindextheory，andmostla［crre－SearChfollowed［hisstyle・AsMacDonaldhimSelfcautlOned，however，therearemanypolntSSuChasda［a

acquisitionthatlackprecisionbecauseofthedifncultyofdirectlyobtainingdataonthevolumeandpricesof

goodsinvestedinR＆Dexpenditure．

7

（3）Kention of an，R＆D exchange rate′　was madelaterin both the

1980　revised edition and the1992　revised draft of the Frascati

Manual．［6］［7］　The calculation method described within was for

the most part the same as that usedin the1979　0ECD report・

Difficulties remainedin obtaining uniform and c00rdinated price

and v01ume data for calculating R＆D PPPs，and′　for countries for

Which no such data was available′　there was no choice but to use

estimated values；the reSearCh results themselves，therefore′

Were nO mOre than rough estimates．

（4）Points to be considered when developing R＆D PPPs are sum－

marized below．

（a）fncreasing necessity for research on R＆D PPP

Research being conducted on R＆D PPPsin the1970s coincided with

a transition by the ma〕Or COuntries from a managed exchange

SyStem tO a floating market sYStem．　This period was als0　0ne Of

COnSiderable activity by theICP，and there was greatinterestin

the relationship between exchange and ppP．　Research was later

SuSPended′　but exchange rates of major currencies beganincreas－

ing‘SubstantiallY against the U．S．d011ar from thelatter half of

the1980s and the disparitY between exchange rates and PPPs

Widened．In addition to this，international relations in the

field of science and techn01ogy have g‘ainedinimportance′　Creat－

ing an environment that makes all the more necessary comparisons

Of R＆D expenditure through PPPs．

Purchasing power parities are nowin wide use′　but these PPPs are

at times appliedindiscriminatelY tO SPeCific fields・　Attempting

to establish fixed PPPs for R＆D expenditureis a significant step

in correcting this error．　All of the earlier research described

above held to the premise that conversion of R＆D expenditure on

the basis of GDP PPPsisinvalid′　and our report takes the same

pos土t⊥on・

（b）Precise calculations using relevant data

Research on R＆D PPPs has to the present onlY PrOduced rough

estimates・　More precise calculations are needed to establish R＆D

PPPs that can serve asinternationalindexes．　This will require

a detailed analysis of R＆Dinput structures and the application

Of relevant price data．　An analysis should also be made of the

hithert0　0bscure details of R＆D expenditure and an accurate

estimate made of average prices．　The sustained endeavors ofICP

8

have allowed more exact calculations of PPP for more countries in

recent YearS′　and the Frascati Manualr t00／has contributed to

the establishment of indexes for science and technologY；GDP

indexes for different countries have also been made to conform

With the revised SNA．　Taking full advantage of these，itis now

POSSible to use even more exact methods to calculate R＆D PPPs・

（C）An aggregation method suitable for PPPs bY GK method

The method MacDonald used　－－　Of breaking down R＆D expenditu上e

into component expenditureitems and weight averaging the values

Of the PPPs of these component items　胃－is an obvious one・

Variations on this aggregation method for componentitem PPPs are

POSSible′　however．　Given the difficultY Of obtaining separate

Price and v01ume data for R＆Dinputitems，One feasible approach

WOuld be to useICP PPP data for R＆D PPP values，aS WaS donein

OECD′S1979　research・　Doing so makes it possible to use the

Weight of uniform average v01umes for each countryin re胃aggrega－

tion by weight averaging．　　Due to the nature of the Geary

Khamis Hethod′　though，the natural calculation method when using

ICP PPP valuesis to take a weighted average of each expenditure

item using the structural rati0　0f expenditure amounts for each

expenditureitemin each countrY reValued through PPPsininter胃

national d01lar terms・（Note　6）　BY having available theinterna－

tional prices connected with overall GDP and the PPPs of each

COuntrY，the weight of each expenditure itemin a particular

COuntrY Can be derived from the monetarY data on eachitem of

that country，s R＆D expenditurelindependent of other countries・

When assigning a uniform weight to each country′　the average

Weight as a matter of course changes with each country added′

necessitating a recalculation for all countriesinv0lved；the

method employed here has the advantage of not producing such

COmPlexities．

（Note6）WhenusingICPPPPdata，OneaCCeptSaSgiventhe、priceandvolumedatatherein．IntheGearyKhamisMethod，therealmonetaryvaluesofeachexpenditureitemandPPPexpressedininternationaldollartermshaveadditiveconsistencyinmatrixform．［9］

UseofthisparticularqualityisthenaturalmeansofapplyingthePPPoftheGearyKhamisMethod・

9

3．CalculationsofR＆Dpurchasingpowerparities

For establishing the best estimation method of R＆D PPPs，first we

have to analYZe theinputs of R＆D，then presume the correspon－

dence ofinputitems of R＆D to PPPs of GDPitems．　We should make

a full use ofICP PPPs，input－OutPut tables，SCience and techn01胃

Ogy Statistics of several countries・UsingICP PPPs datais a

PraCtical s01ution・For that，We have to suppose that prices of

inputsin R＆D can be represented bY those of corresponding things

for general use．Itis natural for us to f0110w the aggregation

method ofICP PPPs when aggregating PPPs for R＆Ditems．

3．1．88Sicidea

（1）Using1985　as a standard，We have made some trial calcula－

tions for R＆D PPPs betweenJapan，the U・S．，France′　Germany′　the

U．X・′　and South Xorea．The fundamentalideain our approachis

thatICP PPPs as they are presentlY Calculated offer a structure

that can unify the PPPs of individual expenditureitems and

represent PPPs for topiCal groups of these items；uSing this

StruCture′　a PPP for R＆D as a wh01e can be calculated by estimat－

ing a PPP for each R＆D expenditureitem and taking a weighted

average of these．

OECD PPPs are used for OECD member states and ESCAP PPPs are used

forJapan and South Korea．BecauseJapan belongs to both of these

groups，theJapanese value can serve as a bridge to allow compar－

isons between South Korea and OECD countries．OECD PPPs can

utilize not onlY data on the　55　GDP expenditureitems but also

the PPPs for the more than190　basic headings．　This makes possi－

ble ppp calculations more suited to R＆D expenditure・

（2）General differences between this report，s method010gy and

that of the earlier research mentionedin the previous chapter

are as f0110WSl

（a）Purchasing power parities for each R＆D expenditureitem can

be estimated more accurately by using the ZCP PPPs and the

detailed data provided bYinput－　OutPut tables・

（b）Expenditureitems have been broken downinto six basic cate一

gories＝　PerSOnnel expenditure．misce11aneous expenditure′　raW

material expenditureJ maChinery and equiPment eXPenditure／land

10

and buildings expenditurel and expenditure for other tangible

fixed assets・（Note　7）

（C）For aggregation of overall PPP for individual R＆D

expenditureitems′　the aggregation method usedin calculating

OECD PPPs was adopted．

（d）Though this report has focused on OECD countries，ESCAP data

l10］has also been used toinclude South Korea・

（e）Estimated R＆D PPPs for YearS before and after1985，uSing

1985　as a standard．

（3）Points to note

We have assumed in our calculations that the ICP PPP values for

each expenditureitem reflect the pricelevels for the corre－

SPOnding R＆D expenditureitems．ICP PPPs have been calculated

from the prices of products in each countrY and expenditure

amounts・　Supposing that we would wish to calculate R＆D expendi－

ture PPPs between countries in the same manner，We COuld more

fullY emPloY the values produced by MacDonald and base our calcu－

1ation of R＆D PPPs on data on the prices and expenditurein each

COuntry for g00ds and services usedin R＆D．In realitY，however，

SuCh a studY WOuld be very difficultindeed．In this report，

therefore′　We have taken the PPPs that correspond to the various

R＆D expenditureitems to reflect the pricelevels for R＆D expen－

diture・　We can expect to achieve more relevant results for R＆D

expenditure bY uSing the values for corresponding GDP expenditure

items thanif we use the PPP for GDP as a wh0le，and we have used

here the most reliable price values among those available・

（Note7）Japan’sR＆Dstatisticslist6expenditureitems，themostde［ailedbreakdownofal1countriesstudied

here・StatisticsfromGermany，France，andtheU．K．，havingno’othertangiblefixedassets’Classincation，list

Only5expenditureitems．

11

3．2　CalcuIation method

3・2・1WeightedaverageofpurChasingpowerparities

Of the valueslistedin the OECD reference（［1］of the bibliogra胃

Phy）′if we take a weighted average of the　－1rati0　0f the nominal

Value（national currencY base）to the real value（d01lar base）

（expressed as K；Note　8）’．for any GDPitems，giving weight to the

real value，We Can Obtain a value for K for all GDP items．

Through this method we can obtain K for Japan，s overall R＆D

expenditure bY bringing K which corresponds to the R＆D expendi－

tureitems to a weighted average′　giVing weight to the real value

Of each ofJapan，s R＆D expenditureitems・This weighted averaging

is carried out for both Japan and the United States．　We can

Obtain the real conversion rate bY Obtaining the rati0　0f K for

the overall R＆D expenditurein Japan andin the United States・

Thisis shown bY the following formulae．

The amount of the R＆D expenditureitemsis xl′　Ⅹ2，・・・Ⅹm・

The rati00f R＆D expenditureitemsis Wl′　W2，・・・Wm（m＝number of

⊥tems）・

The rati0　0f nominal value to real value of the PPP items that

COrreSPOnd to R＆D expenditureitemsis Kl，K2，・・・Km・

The rati0　0f nominal value to real value of the overall R＆D

expenditureis Ko’．

We bring K toits weighted average by the real value of R＆D

expend⊥tuエーe（Ⅹ／K）′　SO；

Kl（Ⅹ1／Kl）＋K2（x2／K2）＋・・・Km（Xm／Km）

KC　＝

（Ⅹ1／Kl）十（Ⅹ2／K2）十・‥（Ⅹm／Km）

Ⅹ1十Ⅹ2＋・‥Xm

（Ⅹ1／Kl）＋（Ⅹ2／K2）＋　‥・（Xm／Km）

Thus far we have represented each R＆D expenditureitemin the

form of a percentag・e Of overall R＆D expenditure／SO We Shall

Change the formula・　The amount of each expenditureitemis

represented by Xl＝∑Xi・Wl；therefore we shallincorporate this

⊥

into the above formula．

12

Wl＋W2　＋　‥・Wm

Ko． （Formulal）

（Wl／Kl）＋（W2／K2）＋　‥・（Wm／Km）　　∑（W／K）

Furthermore′if the K forJapan，s overall R＆D expenditureis KN，

and the K for the United States′　OVerall R＆D expenditureis KA，

then R＆DPPP（Yen／d01lar）is obtained bY dividing theJapanese

figure（KN）bY the American figure（KA）・

R＆DPPP＝KN／KA（Formula2）

（Note8）Thevaluewhichrepresentstheresearchanddevelop一lentpricelevelandwhichisusedincalculatingtherealconversionrateisnotthePPP，buttheratioofthenomlnalvaluetotherealvalue，Whichisclosetothe

PPP（theratioofthenominalvaluetotherealvalueisthePPPexpressedininternationalprices；Wehavere－

ferredtoitastheratioofthenominalvaluetotherealvalueandrepresenteditbytheletterKinthisreportto

distinguishitfromPPPexpressedonaU．S．dollarbase）．Iftherealvalue（dollarbase）ofeachGDPi［em＝

R，andthenominalvalue（nationalcurrenFybase）ofeachGDPitem＝N，thenK＝N／R・Thewordsl－real”

and”nominal’1herehaveadifferentmeanlngfrom［hoseusedwhenlookingateconomicindicatorsoveran

extendedperiodoftimeinwhichtherealvalueisfoundbydividingthenominalvaluebytheprlCeinflation

rate・AvalueforKisfoundforeachitem・InthesecalculationsKisapostulate・

13

3・2・2AssumptionsregardingpricelevelsforR＆Dexpenditureitems

We have made the f0110wing assumptions regarding pricelevelsin

different countries for personnel expendituresr machinerYlin－

StrumentS，and equiPment eXPenditures，land and buildings expen－

diture′　eXPenditure for other tangible fixed assets purchaser raw

material expenditure′　and miscellaneous expenditure・

The corresponding relationships areillustratedin Figure3．（Note

9）

Assumptionl・　The PPP for　′personnel expenditure′is represent－

ed bY theICP PPP for，governmental and educational personnel

expenditure′．

Assumption　2・　The PPP for，machinerY，instruments，and equip－

ment’is represented by the PPP for the　′machinerY and facili－

ties’fieldincludedin the　′gross fixed capital formation，of

ICP PPPs・In similar fashion，the PPP for，land and buildings’

is the same as that for the　′non胃reSidential building construc－

tion’field of，gross fixed capital formation，．　The PPP for

，expenditure for other tangible fixed assets purchase′is that

giVen for，gross fixed capital formation，．

Assumption　3・　A breakdown of’miscellaneous expenditure′　shows

many expenditures that correspond to　′individual consumption′・

Conversely′　the PPPs for，individual consumption，includeitems

that have no connection with R＆D expenditure．　Ztems such as

food′　medical care，and entertainment that have no connection

With R＆D have thus been excluded．　We have noted the types of

g00ds and services commonlyinvestedin for research purposes，

and from theinput－OutPut tables of countries have selected the

ICP PPPs for theitems that most closelY COrreSPOnd to these・

SpecificallY，these are such things as，electrical power，，，comm－

unication’，，publishing and printing，，and　′Office supplies’・

The PPPs of theseitems areintegrated to produce a PPP for

’miscellaneous expenditure′．

Assumption　4・　TheICP PPPs foritems that correspond to’machi－

nery repair’and　′research information service′′　fields in which

R＆Dinvestments are often made′　Were Selected frominput一〇utPut

tables and usedin calculating the PPP for，raw material expendi－

ture′・　For some basic raw materials such as petrochemical pro－

14

Figure3　CorrespondingTableforR＆DExpenditureandPurchasing

PowerParities

The figure shows the corresponding relationship between the

R＆D expenditureitems and the purchasing power parityitems

that represent their pricelevels・

ItcmsorR＆D

Expcnditurc

Miscellancouse叩Cndilurc

Primaryltcms

orP．p．p．

GD P

PRIVATE FINAL CONSUMPT工ON EXPENDITURE

Expendi血eror

【anのble丘xcd

assclpurchasc

La鴫buildings

Machhery，lnStrumCntS，

cqulPment

O［bcrassels

Personnelexpenditure

RavHnalcrialcxpcndilurc

FOOD，BEVERAGES＆TABACCO

CLOTHING＆FOOTWモAR

GROSSRENTFUEL＆POWER

HOUSEHOLDEQUIPMENT＆OPERATION

MEDICAL＆HEALTHCARE

TRANSPORT＆COMMUNICATION

EDUCATl0N，RECREATlON＆CULTURE

RecrcationalcqulPmCnl＆repalrS

Recreational＆cultuTalservices

Books，magaZincs＆ncwspapers

Education

EducationalCoznpcnsationoEEmPloyee

MISCELLANEOUSGOODS＆SERVICES

NETPURCHASESABROAD

GOVERNMENTFINALCONSUMPTIONEXPENDITURE

15

Governmen［alCompensationorEmployee

GROSSFIXEDCAPITALFORMATION

CONSTRUCTION

Residentialbuildings

NoかreSidentialbuildin弾

Cidlcnglneerl喝WOrks

MACHINERY＆EQUIPMENT

O［hers

Exchangerate

ducts that are considered tYPICal trade g00dsr exchange rates

Were uSed because prices f0110w fluctuationsin exchange rates・

These PPP values wereintegrated・

3．2．3　CalculationformuIa

（1）　We established the f0110Wing variables（Kis obtained bY

dividing the nominal value of each GDPitem bYits real value；

Note　8）・

Variables which represent pricelevels of expenditureitems：

K of personnel expenditures

K of material expenditures

K of miscellaneous expenditures　　　　　　　　　　一一一　KO

K of gross fixed capital formation（non胃reSidential buildings）

一一一　KFCON

K of gross fixed capital formation（machinery and equipment）

一一一　KPM

K of gross fixed capital formation（major headings）－－－　KFA

Percentage of overall expenditure：（NotelO）

Personnel expenditure

Raw materials

Miscellaneous expenditure

胃胃－　WP

一一一　WM

一一一　WO

Expenditure for tangible fixed assets purchase：

Land and buildings

MachinerY，instruments and equiPment

Other assets

The sum of theseitemsisl）

（2）　The f0110wing formula give the K for overall R＆D expenditure

in one countrY（KN）・

KN＝1／（WP／KP＋WM／KH＋WO／KO＋WCON／KPCON＋WFM／KFH＋WX／KPA）

（3）　Using the same formula，We Can Obtain the K for the other

COuntries′　OVerall R＆D expenditure（KA）・

（4）　We can obtain the R＆D PPPsin U．S．d01lar using Formula　2・

16

（5）　Updating estimation of R＆D PPPs

We f0110wed the OECD method of estimating PPPs for the years

after1985・OECD estimates the annual value by multipIYing the

1985　PPP values bY the priceinflation rate of each country・In

this report′　We have multiplied R＆D PPPs by the rati0　0f the GDP

deflatorsinJapan and the United States（the rati00f the figure

Obtained after dividing the value of theJapanese deflator based

On1985by that of the United States）・

Pricelevels for g00ds represented bY eXChange rates are consid－

ered to fluctuatein accordance with changesin exchange rates

each year・　The yearly exchange rate and R＆D PPPs are broug‘ht to

a weighted average，uSing‘the weight of fields to which exchange

rates appIY aS Wel1as those of the remaining fields・（Note

ll）（Note12）

（Note9）’Personnelexpenditure’wasconsideredtobetheaveragevalueofgovernmentalandeducational

COmPenSation．Under’rawmaterialexpenditure’，theICPPPP’machinery’wasusedfor’machineryrepair’，

’othergoodsandservices’for’researchinformationservices’，andtheexchangeratefor’basicrawmaterials’・

Theweightoftheseitemsineachcountrywerebroughttoaweightedaverage．Under’misceuancousexpendi－

ture’，theICPPPPvaluesfor’electricalpower∵booksandmagazines’，’realestate∵communication∵buiIding

managementandrepalrSerVices’，’petroleumproducts’，’financialservices’，and’Officesupplies’wereused

respeCtivelyfbr’electricalpower∵publishingandprintlng’，’reales［a［eagency’，’［elecommuflications’，’other

Officeservices’，’petroleumproducts’，’finanClng’，and’othermanufacturlngaCtivities’．

（NotelO）Limiteddatameチntthatestimatesofexpenditurebreakdownratiosforseveralcountrieshadtomade．Theexpenditurerat10SOfEuropeancountrleSWerebasicallytakenfrom19850ECDdata・［11］The

breakdownofR＆DexpenditureonwhichU．S．calculationsarebasedwasgarneredfromdataathand・［12］

ThisdatadividesU．S．industrialR＆Dexpenditureintopersonnelexpenditure，raWmaterialexpenditure，and

indirectexpenditure・Estimatesweremadeofthecomponeptitemsofindirectexpenditure（expenditureforfixedassetspurchase，miscellaneousexpenditure，etc．），uSlngtheratiosofthosesameexpenditureitemsin

JapaIl．

France’sexpenditureratio，withtheexceptlOnOfgovernmenlalexpenditure，uSedthesumofindustrial，higher

educational，andnon－PrOfitresearchorganizations・Germany，sindustrialexpenditureratiodoesnotdivide

tangiblefixedassetsinto’1andandbuildings’and’machines，instruments，andequlPment’，SOeStimateswere

madeuslnggOVernmentalexpenditureratios．FortheoperatlngeXpenSeSOfFrancc，Germany，theU．K・，andSouthKorea，eStimatesweremadeuslngJapaneseratiosforthebreakdownof’misce11aneousexpenditure’and

’rawmaterialexpenditure’．

ESCAPPPPdataaregivemnOtinU．S．doMarsbutininternationaldollartcrms（Asiadollars），SOtheyhavebeenusedasareforthevalueofK．

17

3．3PricelevelsforpersonneI，raWmateriaIIandmisce”aneousexpenditure

3．3，1PersonnelexpenditureforresearcherS

Among OECD PPPsr those corresponding to　′personnel expenditure′

under，government final consumption expenditure′　are，governmen－

tal compensation of employees，and　′educational compensation of

employees，．（Note13）

Weintegrated these two to get a PPP representing pricelevels

for R＆D personnel expenditure・　The calculations for personnel

expenditurein these OECD PPPsinclude the salaries of personnel

in various occupationsT While those for R＆D personnel expenditure

do not include all of these salaries．

The OECD PPP data for1985　gives exchange rates of　￥143　＝　US＄1＝

FFr5．75　＝　D批2．13　＝　GBPO．367．The weight of personnel expenditure

in total expenditureis high・　The PPP for，personnel expendi－

ture′　used hereis an average of，governmental compensation of

employees′　and　′educational compensation of emploYeeS’，and

further studyis merited on theissue of whether thisis a valid

Priceindex for R＆D personnel expenditure・

Let us draw a comparison of monthly salaries of persons employed

as researchersinJapan and the U．S．As a rule′　SuCh fine points

as social security taxes and allowances must be takeninto ac－

COunt When comparing salarYlevelsin different countries，　but

as such considerations are t00　numerOuS for our purposes here′　We

Will content ourselves with a verY general comparison・

（Notell）TheGDPdefla［orisusedforpriceindexesthatusedannualextendedestimates；forcountriesthat

havedevelopedtheirownR＆Ddenator，thatvalueisused．

（Note12）Intheannualextendedestimatesforcertainitemsin’rawmaterialexpenditure’，thePPPforapar－

ticularycarisrepresentedbythatyear’Sexchangerate．

Expresslngthisasaformula，Wehavethefollowlng．

RDPPPtistheR＆DPPPagainsttheU．S．fortheyeart，theexchangerateisEXRt，andtheratiooftheGDP

deflatoragainsttheU．S．isDt（1985＝100）．Theratioofeachexpenditureitem，Withthepricelevelratio

beingthe1985exchangerate，isX．

RDPPPt＝（RDPPP85－EXR85＊X）＊Dt＋EXR了X

18

The monthlY SalarY ratio forJapanese and U・S・reSearChersin

1985was133Yen／d01lar・The PPP personnel expenditure ratio′

however，WaS143　Yen／d01lar，a difference of　6・8％・（Note14）

Thisis not alarge disparitYr thoughr COmPared to that with the

222　Yen／d011ar PPP of overall GDP・Atleastin the case of a

Japan－U・S・COmParisonT thenr the use of the PPP for governmental

and educational compensation of emploYeeS aS the PPP for person－

nel expenditure for researchersis not such a ma〕Or tranSgreS－

SIC）n．

No ESCAP data of，personnel expenditure′　for South Koreain the

basic headinglevel was available／SO We uSed the　－raverage annual

personnel expenditure ratio per researcherHindexinstead・　An

estimate was made by calculating the ratio betweenJapan and

South Korea andlinking this value with the personnel expenditure

PPP values forJapan，the U．S．，and Europe・［13］

Developing SuCh anindex hasits problemsr aS SuCh factors as

national differences in the distribution of researchers among

SOCial classes and the question of whether the number of research

assistants should be included in the denominator must be consid－

ered．　HomogeneitYin data must be carefully maintained′　and

applying thisindex between several countriesis verY Cha11eng－

ing．Consequently，itis perhaps more practical to use the value

Of PPP personnel expenditure between multiple countries・

（Note13）PersonnelexpenditurethroughoutJapanroughlyequa［estoemployeeincomeonthedistribu［ion

SideinGDP．Ontheotherhand，PPPbasesprlCeCalculationontheexpenditureside．ThereforetheprlCelevelofperSOnnelexpenditureisnotdirectlyrepresentedbyPPP．

IfwerepresenttheprlCeratioofperSOnnelexpenditureontheanalogyof［hevariousPPPitems，thePPPof

individualconsumptionindicatestheprlCelevelofresearchers’costofliving．Thatis，WeCanthinkofitas

indicatlngtheprlCelevelofpersonnelexpenditureforresearchers．However，WemuStbecarefulwhentaking

thisview．TheprlCelevelofpersonnelexpenditurewearediscussinghereistheprlCelevelofexpenditurethat

ariseswhencompaniesanduniversitiesemployresearchers，andnottheprlCelevelofgeneralspendingby

researchers．Researchersarelikelytoreceivedifferentstandardsoftreatmentindifferentcountries．Thisidea

holdstrueonlywhenresearchersineverycountryspendtheentireamountoftheirwages，andthespendinglS

Of［hesamequalityandquantlty．Inreality，however，thelifestylesandlivingstandardsofresearchersinthe

Variouscountriesdiffer，SOthequalityandquantityofspendingisdifferent．Thehouseholdsavingsrateisalso

different・WehavethereforeavoidedusingPPPsofindividualconsumptl0nforpersonnelexpenditure・

（Note14）Wecomparedthe1989SalarydataofresearchersinJapanandtheU．S．［181［19］Whiletheaverage

monthlysalaryofresearchersemployedinprivatesectorresearchinstitutesinJapanwas￥472，300（bonuses

dividedupintornonthlyaverages），thoseresearchersemployedbyU．S．industryearnedanaverage＄4，026per

month・Calculatingtheconversionra［eofpersonnelexpenditurebetweenJapanandtheU．S．yieldsarateof

l17．3yen／dollar，andtheestimated1985Valueis133．4yen／dollar．Thisrepresentsayen6．8％strongerthanthe

143yen／dollarPPPpersonnelexpenditurcratio．

19

3・3・2RawmateriaIandmisce‖aneousexpenditure

Theinput data to R＆D sections of theinput－OutPut tables allow

us to assess which expenditures correspond to　′raw material

expenditure′　and　′miscellaneous expenditure′・［14］［15］［16］［17］

Using nationalinput－OutPut tables for1985，We have studied R＆D

input structure・Inputitems of R＆D canr depending on their par－

ticular nature′　be dividedinto　′raw material expenditure′　and

，miscellaneous expenditure′・We have selected thoseitems repre－

Sentinglarge amounts ofinput from among theinputitems that

COrreSPOnd to these two expenditureitems．　A PPP can be assigned

each of theseinputitems according to eachitem，s PPP valuein

OECDinternational d01lar terms・　As a result of our analYSis of

input－OutPut tables，We haveincluded　′electrical power，，，commu－

nication’，’publishing and printing，，and　′Office supplies’in

’miscellaneous expenditure′・

Many such items as，research information service，，，machines

（repair／parts），，and　′petrochemical／inorganic chemical products，

fall under，raw material expenditure，．　Of the　55　0ECD PPPitems，

the prices for　，other g00ds and services，are used for’research

information service，and those for，machinery′　are used for

′machines（repair／parts），　Exchange rates are used for some

basic raw materialsin view of the fact that domestic prices are

adjusted rapidlyin response to changesin exchange rates・（Note

15）　These PPP values are brought to a weighted average of these

Values，uSing the weight of each of theitems corresponding to

，miscellaneous expenditure，in relation to the monetary sum of

theseitems・（Note16）

In the1985input－OutPut tables，OnlyJapan has a separatelist－

ing forindustrialin－house research（business－related research

conducted by corporations）．Other countrieslist onlY reSearCh

done bY gOVernmental agenciesr educationalinstitutionsl and some

（Note15）Priceratiosforaportionofthegoodsincludedin，rawmaterialexpenditure’arerepresentedby

exchangeratesinthebeliefthatthelargevolumeoftradebetweenindustrializedcountriesmeansthatchanges

inexchangeratesarequicklyrenectedinprlCeS・

（Note16）ESCAPonlyreleasesdataon550ftheGDPexpenditureitems・Therefore，PPPbetweenJapan

andSouthKoreaiscalculatedusing55correspondingPPPvaluesfromamongtheOECDPPPexpenditure

items．

20

industries（independent research organizations：Organizations

engaged exclusivelyin research）・Estimates forindustrialin－

house researchin countries other thanJapan have been based on

theinput structure ofJapan，sin－house research・（Note17）

3．4　CalcuIationresults

Figurel shows the rati0　0f each R＆D expenditureitem by country

as well asits PPP value・　Figure　4illustrates the relationship

between exchange ratest R＆D PPPsl and general PPPs・

（1）The relationship of R＆D PPPs toICP PPPs

For all maコOr CurrenCiesI R＆D PPPs against the U・S・d011arr

COmPared with TCP，s GDP PPPs′　are Characterized by a weaker

d01lar and a strongerlocal currency・The cause of thisrl00king

at various R＆D expenditureitems，liesin the fact that the other

ma］Or CurrenCies have grown strongerin personnel expenditure

PPPs thaninICP，s GDP PPPs．In1992，the R＆D PPP was marked by

an approximatelY17％　stronger yen versus the GDP PPP・

（2）The relationship between exchange rates and R＆D PPPs

In1985　exchange rates overa11showed a strong d01lar，but rates

later put the d01lar on a downward trend．　The currencies of

developed countries，COnSequently．have seen a turnaroundin the

relationship between R＆D PPPsin U．S．d01lar and exchange rates・

R＆D PPPsin U・S・d01lar forJapan，s yen have been climbing higher

than exchange rates since1986．　With the exception of the period

1973－1975，this divergence between the exchange rate and R＆D

PPPs，With the exchange rate reflecting a even stronger Yen，is

the first time that such a phenomenon has been observed；in1992

the exchange rate was127　Yen／d01lar，While R＆D PPP was162

Yen／d01lar・　This exchange rate represents a Yen　22％　stronger

than that of R＆D PPP．

（3）Results of U・S・d011ar conversion of R＆D expenditure

Conversion of the R＆D expenditure ofindividual countries to U．S・

d01lars，uSing the R＆D PPP developed here，is shown bY the s01id

linein Figure　5・　Figure　6　shows the conversion of each coun－

trY’s R＆D expenditureinto U．S．d01lars based on this R＆D PPP．

21

Figure4TrendsinR＆DPPP，ExchangeRate，GDPPPPinMajorCountries

一組脚　…kCb咽0紬te　‥・G脚

22

Yen／USS

1m　　　　　1975

1

　

9

　

8

　

7

　

（

O

nU　臼　l凹l l田

臥5

8．4

8．3

も．2

砂．1

日

9鋤

8聞

7閲

688

5関

41旭

3勘

2t旧

刊独

白

Figure5　U．S．DoItarsConversionofR＆DExpenditureS

inMajorCountries

（Unit：BillionDollars）

一礼脚・・…kcbr聯紬te　…G脚

Ja関バ5払D Ex関mHture

Fran治．S関心Ex脚価ture

飴「mnジS闇D ExpemHtu「e

58

4日

38

2も

18

日

25

28

15

柑

5

0

13

12

11

日叫

9

8

7

6

5

4

3

2

1

9

U．K．．S R8D［x画ituro

Kore8－S R鋸日払割的引tu「e

Figure6　U・S・DoHarsConversionofR＆DExpenditures

inMajorCountriesbyR＆DPPP

ly70　1割2　1，74　1ダ75　1978　1980　け82　1，84　は86　11邦8　1期　1！秒2

19711973　1卵5　1餅汀　197，19811！樗3　1発5　1郷7　1，8，　相，l

24

Tablel＿1RatioofR＆DExpendituresltemsinM8jorCountrieSin1985

JaDan U．S．A France Germany U．K． S．Korea

Personnelexpenditures‾附岳元日aneousexpend‾i－t前弯－

Rawmaterialexpenditures

42．3％‾…‾21‾－ち％……

39．8％…‖‘‾22：－1猪来‥‘

58．0％ 57．9％‖…一説－2隊…

45．4％ 30．7％

．　＊ 24．0％＊ 1尋．2獅18．1％ 18．8％＊ 15．4％＊ 13．6％＊ 20．2％＊ 10．7％＊

Machinery，instrunentS 11．8％ 12．3％＊ 6．8％ 6．7％＊ 8．4％ 26．9％

Land，buildings 3．5％ 3．7％＊ 1．4％ 5．6％＊ 1．9％ 11．9％

Otherassets 2．8％ 2．9％＊ － － － 5．5％

Total 100．0％ 100．0％ 100．0％ 100．0％ 100．0％ 100．0％

＊　snows　estlmatlOn

Table1－2R＆DPPPo＝：aChlteminMajorCountriesin1985

rlJr　oT　eaCn ltem Japan 〕．b．A rrance uermany U．K． b．KOrea（Intern at iona l do llars） （￥／＄） （＄／＄） （Franc／＄） （Mark／＄） （£／＄） （Won／＄）

Personne l expenditures 180．0 1．259 7．238 2．680 0．462 189．9

Miscellaneous expenditure 238．6 1．035 7．624 3．063 0．750 514．7

Raw　ateria l ex end itures 227 1 1 5 2． 674 2 ．4Machinery instru nentS 23 1．0 0．938 6．860 2．420 0．644 505．3

an ，　ul lngS 5 ． ．…lr 956．‾’‾…‾－…7 200‾…‖……‾2∴汀0‾……’‾町73グ…‖’‖327！9．．－日．‖

Other assets 255．8 0．930 － － － 423．6

Tota l（weighted average） 208．2 1．073 7．408 2．695 0．568 323．8

R＆DPPP（U．S．dollars）

194 1 6．90 2．51 0．53 302

Excnange rate ln　用的 Z調．b 1．UUU 8．測U Z．94U U．．！用 削U．Z

25

T8ble2UpdatingEstimationofR＆DPPP

（Each Countr’e’C＼凸aCn　LOuntrleS　LurrenCy　Unlt／U．b．＄）JapanU．S．AFranceGermanU．K．．Kore

1970 224 14．563．360．27 941971 223 14．593．410．28 10119’化ZZZ 14．643．41U．ZU 1131973 233 14．663．370．29 1191974 256 14．813．310．31 136

1975 251 14．883．180．35 157

1976 255 15．133．110．38 1741977 252 15．253．010．41 18619．用Z44 1b．34Z．91U．4Z ZU．！1979 231 15．382．770．43 224

1980 223 15．482．660．47 259

1981 211 15．672．570．48 279

1982 204 16．032．540．49 285

1983 199 16．422．540．51 291

1測4 1Ub 1b．’′ZZ．bZU．bZ ZU41985 194 16．902．510．53 302

1986 188 16．892．470．53 303

1987 182 16．792．420．53 299

1988 176 16．762．370．54 297

1989 173 16．752．350．56 295

1男U HU 16．bU乙JZU．5．／3141991 165 16．482．290．58 331

1992 162 16．422．340．59 343

26

U‘t／U S＄）

（Note17）Weselectedmajorinputitemsfrom［heinput－OutPuttablesofJapan，theU・S・，France，andSouth

Koreainanexaminationofinputstructure・Theitcrnslntheinput－OutPuttablesVarybycountry，SOthatmaJOr

itemsusedass［andardsalsodiffer・Anyslngleitemthataccountsfor2－4％ormoreorthetotalintermediate

lnPutamOuntinR＆DwasregardedasamaJOritem・Whenthereareseveralinputitemsfromtheinput－Out

［ablesthatapplytoaslnglePPPitem，WehavetakentheaveragevalueoftheselnPutitemst

Inthepublicsector，theU．S．1ists’educationalresearch’amongthe144itemsoftheJapan－U・S・input－OutPut

table．Francelists86itemsintheJapan－FrancelnPuトOutputtable，including’governmentandpublic－SuppOrト

edresearch’and’educationalresearch’．SouthKorealists274itemsintheJapan－SouthKorealnPut－OutPut

table，including’na［ionalandpublic－SuppOrtedresearch’and’non－prO丘tresearch’．Thereis，however，nO’in－

houseresearch’itemin［heinpuトOutputtablesofthesethreecountries，andtheirindustrialinpu［struc－

turehas，therefore，beenestimatedbasedonJapan，sinputstructure・Eachcountry｝sindustrialinput

StruCtureismultipliedbytheratioofindustrialR＆Dexpenditureinthatcountry，andtothisisaddedthe

PrOductofthepublicsectorresearchinputstructureofthatcountryandtheratioofpublicR＆Dexpen－

diture・ThisyieldsanlnPutStruCtureforeachcollntry．

TherebeingnoitemscorrespondingtoR＆DintheinputTOutputtablesofGermanyandtheU．K．，eXpedient

estimatesweremadeuslngaSimpleaveragevalueofcommonitemsinwhichinvestmentsbyJapan，theU．S．，andFrancewerenumerous．

27

4・ConsiderationsinusingR＆Dpurchasingpowerparities

R＆D PPPis anindex whose basic purposeis currencY COnVerSion，

and this hasled to wide use of thisindex by governments and

COrPOrationsin formulatinginternational p01icY and conducting

P01icY reSearCh・　Uses of R＆D PPPinclude the f01lowing・

（1）Promotion ofinternational understanding ofindividual coun－

tries′　science and techn010gY aCtivities

PolicY C00rdination between countriesin the field of science and

techn010gyis growingin significance，and this has made all the

more critical an understanding of one another，s R＆D activities・

Given such ma］Or fluctuationsin exchange rates as we are seeing

now′　COmParisons of actualinvestments makein R＆D will contrib－

ute greatlY tO a PrOPer understanding of R＆D activities，thisin

turn playing a major r01e in input decisions concerning

SCience and techn0logy・

（2）Provision of basic data for research on the relationship

between science　＆　teChn010gy and the economy

Znternational researchis presently underwaY tO meaSure the

relationship between science and techn010gy and the economy・　R＆D

PPP has animportant r01ein this as anindex for measuring R＆D

expenditurein terms of real purchasing power・　Far different

results will come from research based on nominal monetarY amOuntS

ofinvested capital and that based on the real volume base of R＆D

PPPs．

（3）Usein distribution ofinternational R＆D resources

Corporate R＆D efforts have becomeincreasinglyinternationalized

in recent YearS／and there has clearlY been a diffusion worldwide

of research facilities・　Tn theory atleastr the decision to

conduct R＆Din a particular countryisinfluenced not onlY by

research costsin that country but also bY a number of other

factors，SuCh as that countrY，s R＆D capabilities andits domestic

market・All things being equall the degree to which progress has

been madein theinternational diffusion of R＆D can be seen bY

evaluating the distribution of R＆D expenditureinindividual

countries：　R＆D costsin each countrY　＝　Pricelevels　＝（R＆D

28

PPP／exchange rate）．　For example′　for a certain corporation that

has research centersin bothJapan and the U・S・l Figure　7　shows

the distribution of research v01ume between the U．S．andJapan′

assuming that the productivity of each unit of g00dsinvestedis

the same and that research results are substitutional．In this

CaSe，an analogy can be drawn from the micro economic model for

maximizing the utility of two g00ds・　The horizontal axis in

Figure　7　represents the distribution v01ume of researchinJapan，

While the vertical axis represents the distribution v01ume of

researchin the U．S．　The budgetlineJ－Ais for an exchange rate

Of130　yen／d01lar．When R＆D PPPis at160　Yen／d01lar，the budget

line should l00k like line J－A，in terms of actual investment

V01ume，nOtlike thelineJ－AH reflecting a GDP PPP of　200

Yen／d01lar・The exchange rateinJapan has since1986　continual－

1y been characterized bY a StrOnger yen against R＆D PPP；thisis

the first time since1970　that the exchange rate yen value has

COnSistentlY been higher than that of R＆D PPP．　This will verY

likelYlead toincreased awareness bYJapanese corporations of

theinternational costs associated with R＆D and to even possibly

to greater expansion of R＆D efforts overseas．　Zn the section　4．1

We Will provide a corroborating example of this．

J130　　　R＆D distribution

in quantity toJapan

29

（4）Clarifying R＆Dinvestment price structure

We have also calculated PPPs for R＆D breakdowns bYindividual

COuntries and these will be able to clarify the differencesin

COSt between different fields・High costsin a giVen field result

in suppIY PrOblemsin this fieldJ neCeSSitating p01icies that

Will correct these problems・Such p01icy measures couldinclude

training additional research personnelrinviting foreign re－

SearChers，relaxingimport dutiesr and decreasing tax rates onfixed assets．

4・1ThereIationshipbetweenR＆DPPPandR＆Dexpenditureoverseas

R＆D expenditure bYJapanese corporationsin foreign COuntries

（hereafter，’．foreign R＆D expenditures一．）is on the rise．（Figure

8）We have studied the relationship between this rise and R＆D

PPP・Turning back the　′rati00f exchange rates to R＆D PPP，（Note

18）by　3　years and examining the relationship between this ratio

and foreign R＆D expenditure over the period1977－1992，We nOted

that this relationshipis a negative－Phase one・（Note19）

We can see from this that a　3－Year timelag separates this rise

and the divergence of the exchange rate and R＆D PPP，and we can

See the connection of theincreasein foreign R＆D expenditure・

Theinterval between R＆D planning and actual R＆Dinvestmentsis

measuredin YearS′　and decisions to make newinvestments abroad

Often require more time；We have estimated from the movements of

exchange rates a timelag of up to three YearS．　L00king at

Sequential relationships and the timelag・′itis undeniable that

the divergence of the exchange rate from R＆D PPPis aninfluen－

tial factorin foreign R＆D expenditure・

（Note18）SubtractinglfromthequotientoftheexchangerateandtheR＆DPPPgivesusapercen［agefigure．

（Note19）Thecorrelationcoefficientofthe3－yearmOVingaverageof，theexchangeratetoR＆DPPPratio’

Witha3－yeartimelagovertheperiod1977－1992andforeignR＆Dexpenditure（1985fixedprices）is－0．82．

Making’theexchangeratetoR＆DPPPratio’thedescrlPtlVeVariableXandforeignR＆Dexpenditure［he

SPeCinedvariableY，aSimpleregressioncalculationcanbedone：

Y＝一122932．85X＋34188．98　R2＝0．672

（testt）　（－5・4）　　　（10．1）

30

Figure8－1JapaneseCompanies，R＆DExpendituresto

ForeignCountries

88

78

68

58

48

削

28

18

8

Fjgure8－2　RatioofExchangeRatetoR＆DPPPand

R＆DExpenditurestoForei9nCountries

ノ．

′ヽ－．、．＿

′

・．一一．‾．一、－．．ヽノー－．一、

＼ 、　 ／　　　　　　　　 ド ．・・

ド

l　 l　 l　 l　 l　 l　 l　 l　 l　 l　 l　 l　 l　 l　 l　 l　 l　 l　 l　 l　 l19 7 1 19 7 3　 19 7 5　 19 7 7　 19 7 9　 1！姶I l∞　 1⊆給5　 1≦拾7　 19 甜　 1⑬ l

1972　1974　1976　1978　19掬　lS吟2　1984　1986　1988　1998

Ra［ioofexchangc

ratetoR＆DPPP

31

R＆Dexpenditures

toforelgnCOllntries

（Rateofincrease

topreviousyear）

5．ConcJusions

（1）Caution against usingICP PPP for R＆D expenditure

ICP PPP assumes a final demand structure for the entire economy，

While R＆D expenditureis primarily composed of research personnel

expenditure and expenditure for the purchase of fixed assets for

research・　ConsequentlY，the calculation basis of such a PPP

makesit unsuited for application to R＆D．

（2）Calculations of R＆D PPPs

Our R＆D PPPs were calculated on the basis of R＆D expenditure

StruCture・　These are estimated figures，aPPiying the method01ogY

Of　＝CP PPPs to R＆D and making g00d use ofICP PPPs data as well

as statistics from the countries under study．　According to these

Calculations，1992　R＆D PPP against the U．S．dollarindicates a

17％　stronger yen than that Yielded by theICP，s GDP PPP・　R＆D PPP

makes comparisons of actual purchasing powerin the research

field possible・（Note　20）

Research conductedin1992　by our researchinstitute［10］also

developed values for R＆D PPPs，and this research has beenim－

PrOVed onin a number of ways to produce the present report・

Aslong as thereis a clear correspondence between the expendi－

ture breakdown of a particular field andICP PPPs′　Our Calcula－

tion method can be used to measure the PPPs of fields other than

research．

（3）P01icyimplications of R＆D PPPs

R＆D PPPs reveal the real v0lume of g00ds and services being

investedin R＆Dinindividual countries，and comparisons between

real and nominal v01umes should prove especially useful to coun－

tries and corporations at a time when exchange rates are subject

to such fluctuation．

By sheddinglight on the realinvestments being madein science

and techn010gy around the worldr the application of R＆D PPPsis

Of great benefitin decisions concerning science and techn010gY

investments・Thisindex provides basic data forinternational

（Note20）Inthisreport，Wehaveusedthe1985calculationsofICPPPPs・Seenotel・

32

research measuring the relationship between science and techn010－

gy and the economyJ andit can even be used to explain theinter－

nationalization of corporate R＆D・Furthermorel R＆D PPPs can be

appliedininternational comparative analyses of the costs of

manpower and g00dsinvestedin R＆D・

（4）Promotion of R＆D PPPs calculation worldwide

R＆D PPPis anindexinv01ving multiple countries′　andits calcu－

1ation requires a variety of economic statistics on prices and

production．Regardless of the exact method01ogY adopted′　Calcula－

tions of R＆D PPPs byinternational organizations would be wel－

COme′　and we hope that our research will serve as a reference for

OECD and otherinternational organizationsin developing these

indexes．

Statistical data from even more countries of the type usedin our

researchis neededin calculating R＆D PPPs・　We hope that more

COmPlete statistics wil1be compiled on economic society and

SCience and techn010gy so that concurrent and standardized data

for countries worldwide can be made available．

6．Pointsrequlrlngfurtherdiscussion

（1）　Examination of statistical values

Zn this report we have calculated the R＆D PPPs assuming certain

R＆D expenditure characteristics on the basis of ZCP PPPs．　A more

accurate calculation would require detailed data on R＆D expendi

ture and analYSis of eachitem′s pricelevelinJapan and

OVerSeaS・The f0110wing are the keY POints requiring examination・

（a）　A breakdown of R＆D expenditure；PerSOnnel expenditure for

researchers，Whichis thelargest expenditureitem；and especial－

1y the precise number of researchers and people engagedin re－

SearCh and their wagelevelsin several countries

（b）The capabilitY胃　Or SenioritY－based wage structure coverinq

researchersin each countrYr and a calculation of theinterna－

tional average personnel expenditure・

（2）Analysis of expenditure byindividual data

In addition to the examination of statistical values at（l）

33

above′　We Can COnSider analyses of expenditure atindividual

researchinstitutions or of theinternational price marginin

research－related equiPment and material．

（3）　Use ofICP PPPs for1990

（4）　Calculation of R＆D PPPs for eachindustries

7．Finalcomments

Though GDP PPPs arein wide use now／Our rePOrt reCOmmends that a

SeParate and more relevant pPP be calculated for R＆D expenditure・

The difficultY Of obtaining sufficient data presents a fundamen－

tal problemin developing R＆D PPPs・　We have adopted some new

ideasin this reportr such as employinginput一OutPut tables′　tO

enhance statistical understanding of R＆D．and we hope that R＆D

PPP will play animportant r01ein formulating both national

P01icY and corporate R＆D strateg‘Y・Indexes such as this are

usually developed through a process of trial and error．　We would

like to think that our research will proveinstructive for future

research on R＆D PPPs・　As more science and techn010gyindexes are

established，We hope that OECD and otherinternational organiza－

tions will again take up the task of developing R＆D PPPs・

8．Bibliography

［1］OECD，Department of Economics and Statistics，，Purchasing

Power Parities and Real Expendituresin the OECD　1985’，

OECD′1987

［2］Michael ward′　′Purchasing Power Parities and Real Expen－

dituresin the OECD，，OECD．1985

［3］Statistics Bureau，Hanag‘ement and C00rdination Agency′Japan，

，Report on the SurveY Of Research and Development’，1985

［4］A．S．MacDonald′　′Exchange Rates for National Expenditure on

Research and Development，，，The EconomicsJournal’，June

′1973

［5］OECD，，TrendsinIndustrial R＆D1967－1975，，Annex　＝I，工I，1979

［6］OECD′　′The Measurement of Scientific and Technical Activities

－．Frascati Manual　1980日′

34

Japanese translation：Statistics BureauT Prime Hinister，s

Office′　′Frascati Manua11980′′　March1983

［7］OECD，1992　Frascati Manual Draft，Januaryl993

［8］K＝BA Takao′　WATANABE Yuhei，，Use of Purchasing Power Parities

in Znternational Comparisons of R＆D Expenditure′′　National

Institute of Science and Techn010gY PolicY

Research Paper No．27，December1992

［9］SAKUm＝tsuo′　′The Present State of and　＝ssuesin Purchasing

Power Parity Measurement′／JapanInstitute of Labor Magazine′

July1989　ed土t⊥on

l10］ESCAP，，Purchasing Power ParitY and QuantitY Comparison for

the ESCAP RegiOn，，1985

［11］OECD，，Basic Science and Techn010gY Statistics’

［12］NSF，，Research and DevelopmentinIndustryin1983（NSF85－

325）’，United States，1984

［13］Korean　＝ndustry＆　Techn010gy Promotion Council，，Survey of

Hajor Zndustry and Techn010gY Statistics，，South Korea

l14］Manag‘ement and C00rdination AgencY，Japan，’＝nput胃　Output

Tables′

［15］HinistrY Of　＝nternational Trade and ZndustrY，Japan，’Japan－

U・S・Znput－Output Tables’

［16］Ministry of Tnternational Trade and　＝ndustrY′Japan，’Japan－

France fnput胃Output Tables，

［17］Asia Economic Research　工nstitute′　′Japan－South Korea Input－

Output Tables，

［18］Japan：National Personnel AuthoritY，，Fact－finding Survey on

Private Sector Salaries，

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’Salaries of Scientists，EngineerS，and Technicians，，USA

35

ー：二二＿－∵ィ．t．　　　　．‾一一／

冊胴紺冊11011°10435◎