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On the measurement of real R&D: Divisia price indices for UK business enterprise R&D

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  • Gavin Cameron

Abstract

This paper argues that, to measure the quantity of R&D undertaken, it is necessary to deflate R&D spending by a measure of its cost. Based on Divisia weighted averages of proxy price series, price indices are constructed for R&D spending in UK manufacturing in eight sectors and as a whole for 1970–1992. These indices are a better guide to the cost of performing R&D than the GDP deflator, which overstates the rise in real business enterprise R&D in the 1980s, although year-on-year changes are less distorted. Divisia indices are theoretically and empirically better at capturing changes in the cost of R&D than are fixed weighted indices. An investigation of the rapidly rising level of pharmaceutical R&D in the UK concludes that the rise is genuine in that it has not been driven by rapid increases in research salaries. Copyright , Beech Tree Publishing.

Suggested Citation

  • Gavin Cameron, 1996. "On the measurement of real R&D: Divisia price indices for UK business enterprise R&D," Research Evaluation, Oxford University Press, vol. 6(3), pages 215-219, December.
  • Handle: RePEc:oup:rseval:v:6:y:1996:i:3:p:215-219
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    File URL: http://hdl.handle.net/10.1093/rev/6.3.215
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    Cited by:

    1. Antoine Dechezleprêtre & Elias Einiö & Ralf Martin & Kieu-Trang Nguyen & John Van Reenen, 2016. "Do tax Incentives for Research Increase Firm Innovation? An RD Design for R&D," NBER Working Papers 22405, National Bureau of Economic Research, Inc.
    2. Lisa Evers & Helen Miller & Christoph Spengel, 2015. "Intellectual property box regimes: effective tax rates and tax policy considerations," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 22(3), pages 502-530, June.
    3. Evers, Lisa & Spengel, Christoph, 2014. "Effective tax rates under IP tax planning," ZEW Discussion Papers 14-111, ZEW - Leibniz Centre for European Economic Research.
    4. Gavin Cameron, 2003. "Why Did UK Manufacturing Productivity Growth Slow Down in the 1970s and Speed Up in the 1980s?," Economica, London School of Economics and Political Science, vol. 70(277), pages 121-141, February.

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