1Center or American Progress | Measuring Future U.S. Competitiveness
Measuring Future U.S. Competitiveness
U.S. Productivity and Innovation Snapshot
Adam S. Hersh and Christian E. Weller February 9, 2011
Introduction
Produciviy growh—he rae a which we increase producion wih a given amoun o work and resources—is criical o our naional economic prosperiy and compeiive-ness, and a acor ied closely o he pace o real invesmen. Invesmens in equipmenand innovaion lead o produciviy growh, and produciviy growh leads o long-runincreases in our sandard o living. As he U.S. economy coninues o pull ou o he Grea Recession, a number o rendspoin o clear signs o rouble or presen and uure U.S. compeiiveness. Firs, invesmenconinues a a slow pace, barely keeping up wih capial depreciaion. Second, he eecso slow invesmen can be seen in lagging produciviy growh, which is below average orhis poin in a business cycle. Tird, he U.S. high-ech rade deci is widening once again. Ye a number o ingrediens or aser produciviy growh in he uure do show prom-ise. Tis is rue or privae secor-led research-and-developmen spending, he numbero newly rained Ph.Ds now being mined a our universiies, and signs o recovery inhe venure capial secor providing criical invesmen o early-sage innovaion, espe-cially or clean energy echnologies.Te daa presened here poin o subsanial challenges ahead o U.S. economic prosper-iy. Te snapsho o U.S. produciviy and compeiiveness presened here shows hapolicymakers mus give more atenion o srenghening he acors ha could lead ouure produciviy growh and rising living sandards.
The numbers tell the tale
Investment drives productivity growth
Figure 1 depics he long-run relaionship beween invesmen and produciviy growhin he U.S. economy. Te red line plos he ve-year rolling average produciviy growhrae. Te blue line shows a ve-year rolling average invesmen rae as a share o gross
2Center or American Progress | Measuring Future U.S. Competitiveness
U.S. productivity snapshot
Past investment (17-year lag) and current productivity growth
Source: Author’s calculations of BEA and BLS data.
-1%0%1%2%3%4%5%7%8%9%10%11%12%13%14%
D e c - 7 0 D e c - 7 2 D e c - 7 4 D e c - 7 6 D e c - 7 8 D e c - 8 0 D e c - 8 2 D e c - 8 4 D e c - 8 6 D e c - 8 8 D e c - 9 0 D e c - 9 2 D e c - 9 4 D e c - 9 6 D e c - 9 8 D e c - 0 0 D e c - 0 2 D e c - 0 4 D e c - 0 6 D e c - 0 8 D e c - 1 0
Labor productivity growth rate
Investment rate(five-year average, share of GDP)
Investment (17-year lag)Output per hour (five-year average)
domesic produc, lagged 17 years. Ta is, any poin on he horizonal axis shows he conempo-rary produciviy growh and he invesmen raerom 17 years beore. Lagging invesmen indicaesa clear causal relaionship: Invesmen leads ohigher produciviy growh in he long run.
Investment is at the lowest level in four decades
1
Business invesmen has averaged 10.3 perceno gross domesic produc in his business cycle,rom December 2007 o December 2010. Tis ishe lowes average or any business cycle since he1970s. Low invesmen is no due o he cos oravailabiliy o capial. Ineres raes on corporae AAA bonds sand a jus more han 5 percen, helowes persisen ineres raes since 1966.
2
Andhe nonnancial business secor is holding more han $1.9 rillion in cash, oaling7.4 percen o oal corporae asses in he hird quarer o 2010—he highes levelsince he ourh quarer o 1959.
3
Investment is barely keeping pace with capital depreciation
4
Ne invesmen (invesmen minus depreciaion) has averaged 1.5 percen o GDP inhis business cycle, beween December 2007 and December 2010. Tis is he loweslevel since he 1940s and less han hal o he nex lowes average, 2.5 percen, ha wasrecorded rom March 2001 o December 2007.
Productivity growth lags behind previous business cycles
5
Produciviy growh ypically increases during a recession and early in a recovery.Produciviy growh or he rs 12 quarers o his business cycle, rom December 2007o December 2010, oaled 7.6 percen, below he average o 8.5 percen or he previ-ous eigh business cycles lasing a leas hree years.
Domestic innovation is down
6
Te number o uiliy paens (paens graned or he invenion o “new and useul” ormaerial improvemens o processes, machines, or maerials) graned by he U.S. Paenand rademark Oce in 2009 did rebound rom recession-year lows in 2008, jumping
3Center or American Progress | Measuring Future U.S. Competitiveness
6 percen o 167,349 paens graned in 2009. Bu even hough paens overall were up,he share o paens graned o Americans coninued a 15-year slide in 2009. In 1996,nearly 56 percen o paens graned were o U.S. origin. By 2008, his share dipped below 50 percen or he rs ime, and i sayed a 49 percen in 2009. Boh Americansand oreigners can apply or paen righs under U.S. law.
High-tech trade balance deteriorates sharply
7
Te U.S. rade deci in advanced echnology goods worsened sharply in 2010 despiea lower dollar and increased overseas economic growh. Expor growh o high-echgoods coninued o be srong, up 7.2 percen in infaion-adjused erms or he12 monhs ending in November 2010. U.S. high-ech impors—already larger—wereup 15.9 percen a he same ime. Te advanced echnology rade deci worsened onearly $80 billion, or 38 percen larger han a year earlier. Te high-ech rade deciamouned o 13 percen o he overall U.S. rade deci in he year hrough November2010, he larges deci since July 1998.Meanwhile, he U.S. services rade surplus in research and developmen reversed isdecline in 2009.
8
Te surplus in ne expors o research and developmen serviceseroded rom $5.1 billion in 2000 o jus $1 billion in 2008, bu in 2009 expanded onceagain o $2.6 billion. Service rade ypically consiss o ransacions beween a corpo-rae paren and is subsidiaries bu his surplus noneheless indicaes he srengh o criical R&D uncions in he U.S. economy.
U.S. government R&D spending lags far behind private R&D spending
9
oal infaion-adjused R&D spending by he ederal governmen increased rom$353 billion in 2003 o $423 billion in 2008, he mos recen year or which compleedaa are available. Privae-business R&D spending comprised wo-hirds o all R&Dspending during his ime and grew a an average annual rae o 4.5 percen hrough 2008.Federal governmen R&D spending grew a only 1.5 percen annually hrough 2008.
The United States lags behind other countries in R&D spending
10
U.S. R&D spending amouned o 2.7 percen o GDP in 2007 (he mos recencomparable year), ranking eighh in he world. Israel, Sweden, Souh Korea, Finland, Japan, Swizerland, and Iceland all dedicaed a larger share o heir economies o R&Dinvesmen. China, in comparison, dedicaed 1.5 percen o is GDP o R&D andranked 24h among all counries.
Search History:
Result 00 of 00
00 results for result for
p.
Measuring Future U.S. Competitiveness
Adam S. Hersh and Christian E. Weller show that policymakers must give more attention to strengthening factors that could lead to future productivity growth and rising living standards.
571
Reads
0
Readcasts
0
Embed Views
More From This User
Notes
Load more
