13 February 2012

Manufacturing vs. Industrial R&D

One of the arguments for special government support of manufacturing is that manufacturing is a key to industrial R&D throughout the US economy (e.g., here). The data above comes from BEA and NSF and shows that as manufacturing declined as a portion of GDP from 2002 to 2007, industry R&D nonetheless increased (note: NSF data goes to 2007). Since 2007 manufacturing has continued to decline as a proportion of GDP (to 92 in 2010 in the graph above) while it appears that industrial R&D has tracked GDP (e.g., see here in PDF).

With industrial R&D increasing faster than GDP over the past decade, even as manufacturing fell sharply as a proportion of GDP, I find little support for the argument that support of manufacturing is in some way critical for supporting industrial R&D.


  1. Where are the last 4 years, Roger?

  2. Roger -

    How are industry and manufacturing defined here? How do they overlap? What about the definitions is mutually exclusive?

    And besides, aren't manufacturing and industry both just other words for service? ;-)

  3. -2-Joshua

    Thanks, manufacturing according to NAICS and industrial R&D according to the NSF survey methods. It is safe to conclude that manufacturing R&D is a subset of overall industrial R&D.

  4. Roger: we really, really need data for the last four (4) years! Since the dictator took over.

  5. -4-jae

    Thanks, according to the post and links 2010 is 92 for manufacturing and ~106 for industrial R&D. Your conclusion?

    (I'd guess 2011 would come in at about 94 for manufacturing and 108 for industrial R&D).

  6. Roger:

    I guess my conclusion would be that the very short term (3-year) trend you show in R&D shares a lot in common with the global temperature trend. IOW, the short trend many not mean much.

    Unfortunately the red one is still trending, though.

  7. What sectors are responsible for the uptick in industry R&D spending from 2004-2007? Is it an overall rise in industrial R&D, or are there specific NAICS sectors that stand out and are driving the uptick? This is a pretty short time series, so I'm interesting in the specifics here. A follow up post in order?

  8. -7-Jesse Jenkins

    Well, since manufacturing broadly is the sector with about 70% industrial R&D, then I think you'll know the answer to your question ;-)

    But as the data shown in this post indicates, the relative decline of manufacturing as a proportion of GDP is perfectly consistent with increasing R&D. So if you want to increase industrial R&D, there are surely better tools than effort to give manufacturing special treatment.

    Of course talking about a sector that lumps in both pharmaceuticals and textiles is probably not the path to wisdom ;-)

  9. -7-Jesse Jenkins

    From NSF data, R&D intensity of manufacturing sector:

    2002 = 3.7%
    2007 = 4.4%

    Is that increase a good thing? Did it happen while jobs declined dramatically in manufacturing, revenues went up, productivity increased and the sector shrunk as a proportion of GDP?