International Comparisons of R&D Expenditure : Does an R&D PPP Make a Difference?

Purchasing power parities (PPPs) for Ramp;D expenditure in 19 manufacturing industries are developed for France, Germany, Japan, the Netherlands and the United Kingdom relative to the United States for the years 1997 and 1987. These PPPs are based on Ramp;D input prices for specific cost categories and differ substantially from current practice of comparing Ramp;D expenditure using GDP PPPs and deflators. After taking into account differences in the relative price of Ramp;D labor and materials, separate PPPs for other Ramp;D cost categories are less essential, and a simpler version using GDP PPPs for these other categories should suffice. Our preferred PPPs are used to compare international Ramp;D costs and intensity. The results suggest that the efforts devoted to Ramp;D in each country are more similar across countries than is apparent using the nominal Ramp;D intensities that are currently the norm