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+Measurement of R&D activities' total-factor productivity

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Title

Only in Japanese

Japanese title

研究開発活動による全要素生産性の波及効果の測定 ― 研究開発支出の資本化の枠組み ―

Author

KURODA Masahiro

Keywords

R&D investment, Industry-related tables, Total-factor productivity

Date of publication

November 29, 2019

Publisher

National Graduate Institute for Policy Studies (GRIPS)
SciREX Center

Series No.

2019-#1

URL

https://scirex.grips.ac.jp/resources/2019/SciREX_WP_2019_1.pdf

Series name

SciREX Working Paper

Abstract

The 21st century is seeing substantial structural change from a top-down vertical division of labor system through the production process in manufacturing to a horizontal division of labor system as an interconnected platform of specific process characterized by recent development of info-technology. Such change has been drastically reconstructing the former production structure which has been desirable so far both domestically and internationally.

We compiled the Japanese input-output table in which R&D expenditures were internalized as intangible capital investment, enabling the evaluation on intangible assets as knowledge stock by quantity and quality measures. By that process, R&D investment by government as well as industry that contribute to static and dynamic total factor productivity improvement could be observed and coped with the production efficiency improvement by industry through industry linkage. The Kuroda-Nomura (2004) says the static and dynamic total factor productivities are the result of the measurements which we proposed as concept to measure the technological linkage effects in producing commodities statically and dynamically. Technologies of a productive activity are mutually interdependent through the market transactions of all the “produced” inputs. This implies that the production of one commodity is linked to that of all other related commodities, both directly and indirectly, through intermediate transactions. The change in a commodity’s technological efficiency should be measured as the change in the economy’s productivity induced by technical change in all linked activities. We also emphasized that the productivity of a specific commodity is not only affected by the linked technologies through the interdependency of the current technologies, but also influenced by the past technologies which were embodied in the current capital stock. It is because the capital stocks used in the current production activities are composed by the past flow of the investments, which embodied the past technology at the time invested. We proposed two concepts of the measurement as “Static Unit Total Factor Productivity (Static Unit TFP)” and “Dynamic Unit Total Factor Productivity (Dynamic Unit TFP)”.

We propose, in this paper, the framework in which we try to measure the productive efficiency of production activities by accumulating knowledge about investments for Research and Development (R&D) and Information & Communication (ICT) activities. We try to introduce R&D and ICT activities into the Input-Output framework explicitly and show the theoretical frame to measure how the accumulated intangible assets in R&D and ICT as knowledge stock could create the efficiency of the production activities. R&D and ICT investments are introduced as capital formations as intangible assets, which are invested by government, non-profit organizations and independent research institutes as well as intra activities within private firms. It is assumed that each R&D and ICT investments accumulate knowledge stock as intangible assets and the knowledge stocks create the capital service flows as technological knowledge. We try to apply our proposed measurements of static and dynamic total factor productivity to evaluate the efficiency changes by the accumulation of knowledge stocks as intangible assets of R&D and ICT activities. We estimated the Japanese Input-Output Table during 1995-2011 and show our results of the measurement of the contributions of the R&D and ICT investments on the changes of the production efficiency in the Japanese economy. 

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